A reliable rule of thumb is that partisan pundits rarely make good economic analysts, mostly because they don't usually know what they're talking about.
Example: if you were to believe the take of longtime local, liberal cynic Geov Parrish, then you would presume the federal takeover of Fannie Mae and Freddie Mac means the next Great Depression starts...now. Moreover, this is all the fault of free markets, Bush/Cheney, and the related evils of all that is capitalism, Republicans, etc. You get the point.
Problem: the New York Times coverage of the actual news utterly refutes Parrish's premise:
The plan represents a cease-fire in a decades-long ideological battle over the proper role of the companies. Free-market conservatives see the companies as extensions of "big government," while Democrats have protected them as the main vehicle to promote affordable housing for middle- and lower-income people.Alan Greenspan, the former Federal Reserve chairman, and Lawrence H. Summers, a Treasury secretary under President Bill Clinton, along with many other critics, have long maintained that the companies were too powerful politically and financially, and that their huge portfolios posed enormous risks to the financial system.
Moreover, these critics have complained, the companies have used their ability to borrow at low interest rates to dominate the mortgage-finance market, usurping the role of other financial institutions, which do not have the same subsidy.
Free-market adherents have warned of impending disaster as Fannie and Freddie used an implicit government backing to borrow at will, with only a tiny sliver of capital to protect them from nasty surprises like the recent sharp decline in housing prices and rise in foreclosures.
Mr. Paulson has sought to avoid taking sides in the debate, but in recent months came to the conclusion that the companies' conflicting missions of providing federally backed financing for affordable housing while serving shareholders were untenable.
"Market discipline is best served when shareholders bear both the risk and the reward of their investment," Mr. Paulson said on Sunday. "While conservatorship does not eliminate the common stock, it does place common shareholders last in terms of claims on the assets of the enterprise."
Holders of the companies' common stock will not fare well...
How did stock markets across the globe react to this supposed death knell of the economy as we know it? They soared.
It wouldn't be wise to say the credit crunch is behind us, the housing market will suddenly turn festive, and stocks are set for the next great bull run. The whole reason government intervention was necessary was the quasi-public system supporting the two mortgage giants had quite literally gotten too big for its britches. Stock owners taking a bath - as they will - is one thing. The crash of bond portfolios based on trillions of dollars in American mortgages would have been the nightmare Parrish errantly foresees now. It's the definition of "too big to fail."
For now, it's reminder that when your sources for economic analysis are partisan blogs and even the New York Times is running a different tale, you might not be on solid intellectual ground.
Posted by Eric Earling at September 08, 2008 09:03 PM | Email ThisAny reason why the CEO's are not under arrest? Where are the congressional hearings? These folks should be going to jail. Ken Lay is nothing compared to these crooks.
Go here for more info. http://www.glennbeck.com/content/articles/article/198/14949/
This is disgusting. What else is too big to fail? The Big 3? The Airlines? The establishment in Washington (D's & R's) are to blame. They don't care anymore.....
Posted by: Dengle on September 8, 2008 09:25 PMIt seems the idea began during FDR's New Deal and just kept getting bigger.
With the hint that Uncle Sam would cover their "bets," they made a bundle for their executives and stockholders as they grew to be "too big to fail."
It seems it is just another example of the problems that occur when socialist ideas are attempted. They undoubtedly accomplished a lot that people would like, but how many ordinary folks thought they would have to pay the bills left behind by those executives and stockholders?
Posted by: Micajah on September 8, 2008 09:35 PMhttp://www.stephenbainbridge.com/punditry/comments/the_imminent_fannie_mae_and_freddie_mac_debacle/
http://www.ciaonet.org/pbei/aei/oti/wap02/
By the way ... here's how real liberals at Harvard Business School look at the issue, like the problem is the rest of the world isn't government owned and run (don't miss the comments): http://discussionleader.hbsp.com/hbreditors/2008/07/what_fannie_mae_and_freddie_ma.html
Posted by: sullinsea on September 8, 2008 09:59 PMRemember which party is in control of Congress. Now consider this list of the top recipients of Fannie Mae/Freddie Mac political contributions:
Top Recipients of Fannie Mae and Freddie Mac Campaign Contributions, 1989-2008
Name Office Party/State Total
1. Dodd, Christopher J S D-CT $133,900
2. Kerry, John S D-MA $111,000
3. Obama, Barack S D-IL $105,849
4. Clinton, Hillary S D-NY $75,550
5. Kanjorski, Paul E H D-PA $65,500
See a trend there? And see number 3? Impressive total for just a few years.
And number 1? Wow - the Senator who got the sweetheart loan deal from Countywide Financial! Another coincidence? Or maybe Dodd has a talent for squeezing mortgage companies...
It's not being investigated because if it was, it would point right back at the Slavery Party. And of course, the Obamassiah. And we simply cannot have that!
So rather than do what is right, they'll do what protects their own rears and cover it up.
And Obama and the Slavers think they're the party fighting corruption!
Posted by: Shanghai Dan on September 8, 2008 10:40 PMObviously. Any one of your moronic posts certainly qualifies.
Thanks for asking.
Posted by: hinton on September 9, 2008 06:54 AMhttp://query.nytimes.com/gst/fullpage.html?res=9d01e7d8173df936a15754c0a9629c8b63
THE PUBLIC EDITOR; Is The New York Times a Liberal Newspaper?
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By DANIEL OKRENT
Published: July 25, 2004
OF course it is.
The fattest file on my hard drive is jammed with letters from the disappointed, the dismayed and the irate who find in this newspaper a liberal bias that infects not just political coverage but a range of issues from abortion to zoology to the appointment of an admitted Democrat to be its watchdog. (That would be me.) By contrast, readers who attack The Times from the left -- and there are plenty -- generally confine their complaints to the paper's coverage of electoral politics and foreign policy.
I'll get to the politics-and-policy issues this fall (I want to watch the campaign coverage before I conclude anything), but for now my concern is the flammable stuff that ignites the right. These are the social issues: gay rights, gun control, abortion and environmental regulation, among others. And if you think The Times plays it down the middle on any of them, you've been reading the paper with your eyes closed.
But if you're examining the paper's coverage of these subjects from a perspective that is neither urban nor Northeastern nor culturally seen-it-all; if you are among the groups The Times treats as strange objects to be examined on a laboratory slide (devout Catholics, gun owners, Orthodox Jews, Texans); if your value system wouldn't wear well on a composite New York Times journalist, then a walk through this paper can make you feel you're traveling in a strange and forbidding world.
Start with the editorial page, so thoroughly saturated in liberal theology that when it occasionally strays from that point of view the shocked yelps from the left overwhelm even the ceaseless rumble of disapproval from the right.
Across the gutter, the Op-Ed page editors do an evenhanded job of representing a range of views in the essays from outsiders they publish -- but you need an awfully heavy counterweight to balance a page that also bears the work of seven opinionated columnists, only two of whom could be classified as conservative (and, even then, of the conservative subspecies that supports legalization of gay unions and, in the case of William Safire, opposes some central provisions of the Patriot Act).
(More at the link)
So, when you post, and you start off by writing like an ignorant moron, (That's you, "Ernesto") and then spill bile in your screed of the variety you dumped on us... well... one should consider the source. (Again, that's you, "Ernesto")
Tah.
Posted by: hinton on September 9, 2008 07:09 AMYou know, you and I probably think more alike than we do differently. I have to admit that I am in awe of your use of razor sharp irony and sarcasm in laying out your position while at the same time destroying mine.
For starters, your feigned egregious oversight in qualifying my post's opening sentence as a question (when in fact it was most obviously a statement) in order to emphasize my embarrassing lack of sophistication by cunningly making yourself appear to be a complete imbecile (with your biting "thanks for asking") is something even Oscar Wilde would appreciate.
Posted by: Ernesto on September 9, 2008 09:04 AMI cannot possibly express what an impressive feat of reverse psychology you employ by pretending to so vociferously argue such a mute and insignificant position. By completely ignoring the clear-cut validity of my economic critique, you caustically hold up a polemic mirror of intellectual acuity that I can only stare back at in wonder...well done,
Posted by: Ernesto on September 9, 2008 09:05 AM