All of this has led Americans to wonder: What happened? How the heck did we get here? Whose fault is it? Who do we blame? What mistakes were made? How can we get out of this mess?Time and again, since I was but a wee sprout, I have observed that a remarkable amount of the time, politicians get elected by promising to "fix" problems that they have caused. They use the massive power of government to fix some perceived injustice, never dreaming--they haven't the training or background reading to understand the subject, all too frequently--that they are going to cause more problems than they solve, and then, utterly unable to perceive that they have screwed up, blame everyone else for the resulting chaos and try yet again to "fix" the problem.
There has been much debate about this question, but the ultimate source of the problem, it is generally agreed--the triggering event that caused the chain of other dominoes to fall--was the collapse of the subprime mortgage market in the United States. Banks and mortgage companies had made trillions of dollars in loans to individuals with terrible credit. They signed loans with illegal immigrants, offered so-called NINJA (No Income, No Job, No Assets) mortgages, and allowed people with bad credit to leverage their money. When the loans began to fail in large numbers, a new term entered our national vocabulary: toxic assets. And so the crisis began.
Still, an underlying mystery remained: What explains this perplexing behavior? Were they nuts? Did they simply take leave of their senses?
The conventional narrative was written in the first days of the collapse. And as usual, the loudest, most obstreperous voices seemed to prevail. "The private sector got us into this mess," Congressman Barney Frank indignantly declared as events began to unfold; "the government has to get us out of it."
According to this view, deregulation of the banking industry had encouraged the rise of "predatory lenders" who had pushed home loans on people who couldn't afford them. Those loans were then sold to unscrupulous Wall Street financiers, who repackaged them in the form of mortgage-backed securities. The securities were sold in turn to mutual funds, pension funds, and various foreign investors. but their value was grossly overstated and ultimately rested on the faulty assumption that housing prices would keep rising indefinitely. Once again, the supposed result of irresponsible deregulation of financial markets.
This explanation, coming from Frank, had the obvious benefit of pinning the collapse on his political enemies, the Republicans, while completely exonerating any Democrat (such as himself) who had responsibility for overseeing Fannie Mae and Freddie Mac, the government-backed lending institutions that traditionally acted as a backstop to the housing market. It is not an accident that Frank has been in the forefront of attempts to minimize the crisis or (when it could no longer be denied) deflect the blame to his opponents. When some conservatives pointed out that Fannie and Freddie had abandoned their sober mission of stabilizing the middle-class housing market in favor of a misguided crusade to expand minority home ownership by forcing banks to lower their lending standards, Frank and his allies brazenly shouted them down.
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...the rush to heavy government intervention, new programs, and massive spending was now treated as inevitable. It was the 1930s all over again, and Obama was the new FDR. Free-market economics had been tried and found wanting. Obama referred to its theories dismissively as "failed ideas" and refused to entertain any talk of tax cuts or (God forbid) "doing nothing" in response. To the contrary, the crisis proved that it was time to return to stronger government controls. Anyone standing in the way was seen as part of the political fringe, a die-hard ideologue on par with a Holocaust denier.
This is the self-serving fairy tale propounded by Barack Obama and his allies in Congress and the press. The actual truth about what happened was a much more interesting and complicated--and incriminating--story, too complex to be conveyed in a media sound bite.
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It was a massive social engineering project, a grand generational enterprise, thirty years in the making, carried out by an ad hoc alliance of radical activists, labor unions, liberal politicians, federal bureaucrats, and Wall Street financial titans who sought to make getting a mortgage and owning a home a civil right.
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...the heart of the story is the role that radical activists and liberal politicians in Washington played in trying to harness the U.S. financial system to advance their socialist agenda. Properly understood, it is a cautionary tale about the perils of trying to use the power of the state to do good, to help people by giving them a leg up, to "level the playing field." Ironically, such efforts have usually ended up doing the most harm to the very people they were intended to help. The result in this case was no different.
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...two additional facts should be very disturbing to American taxpayers.
First, the same people who caused the debacle have now been tasked with cleaning it up. The Obama administration is full of Clinton retreads, and they show no signs of having learned anything from the damage they have wrought.
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Second, the same cast of characters is busy leveraging state power to manipulate capitalism for their next great social cause: the so-called green economy. Just as occurred in the subprime mortgage crisis, federal authorities and environmental activists are working in tandem, browbeating energy companies and the automotive industry, using the power of the state to compell the creation of carbon-trading schemes and the forced development of green technologies that are simply not profitable. This approach essentially co-opts the regulatory power of the government to create false incentives to invest in green technologies.
The Silicon Valley investor Eric Janszen (who according to the New York Times accurately predicted the dot-com bubble) says that the hype and activism behind green technology will create enough "fictitious value" that the coming green tech bubble will reach an astonishing $20 trillion...before it bursts. In the meantime, environmental activists and their political allies stand to profit handsomely: former Vice President Al Gore has already netted $100 million in profits from green economy schemes.
Plus, of course, the green agenda offers plenty of scope for good old-fashioned political self-dealing. See, for example, this story from the Washington Times of July 15, 2009: "Rep. Ed Perlmutter of Colorado inserted a provision into the recently passed House climate change bill that would drum up business for 'green' banks, such as the one he has invested in and his family and a political donor helped found in San Francisco...Mr. Perlmutter, a two-term Democrat, has two investments in the 3-year old New Resource Bank, which calls itself the nation's first green bank."
Needless to say, there will be much more to come. This is just the tip of the iceberg.
We have not nearly seen the end of liberal activists trying to manipulate the capitalist system for their own profit and social goals. Unless they are stopped, the rest of us are going to pay the price.
The story is told of a baseball manager who, unsatisfied with the play of his left fielder, benches him and plays the position himself in the critical last inning. After muffing an easy pop fly, the manager heads back into the dugout and announces to the left fielder, "Son, you got left field so messed up, can't nobody play it."
Right now, more than seventy years of government interference in the natural activity of the marketplace has so fouled up the field that can't nobody play it--and yet if you offer the obvious solution: let the air out of the balloon, get the government off the field--you will be shouted down as the obvious lunatic.
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