In a comment on my recent EPA post, Rob wrote:
Claim that it's all the Democrats' fault and they're the ones who need to clean it up.
Blame a generic "Congress" for not doing something your own party pulled every trick in the book to prevent. For 25 years.
It's really those last two that they use to the best effect, isn't it?
No, not really. They're very good at the first 3 as well. That's how they've convinced people the govt is useless and overpaid. The problem with those 3 is that they're usually underground, invisible, done in the dark behind closed doors. The Pubs use their (totally undeserved) reputation for competence to destroy programs and even whole agencies. They say, after tearing the agencies apart, "Well, we did the best we could but govt just isn't the most efficient way to do things." But their real agenda shows up in results where the connection between govt failures and commercial successes is never made.
Take the mortgage crisis.
It was precipitated by conservative ideologues who deregulated the banking industry and allowed lots of "experimentation" by poorly supervised (if at all) lending companies. These lending companies, as I've said before, saw an opportunity to make money by taking on the marginal customers the FM's were aimed at, the ones banks had never shown the slightest interest in because even if they gave them a mortgage the return would be too low to be worth the effort and the risk that the loan might go bad. But with the restrictions on mortgage criteria and special "fees" eliminated and the weakest possible oversight in place once Bush was elected, commercial lenders sprang up with a multitude of scams and evasions that promised riches produced by ripping off poor people.
When the investor class starts thinking it can make extra money off the poor people it's already exploiting, you know something is about to go horribly wrong.
So the lenders scammed the poor and marginal and then sold the bogus notes, many of them illegally altered, to greedy banks who let the $$$ in their eyes blind them to the absurdity of expecting people whose combined income was $800/month, gross - maybe - to make a $30,000 "bubble payment" 3 years after they took the loan. Millions of these hopeless loans were made and sold to idiot banks before they went bad for 75-80 cents on the $ and everybody thought they were going to get rich.
Until the inevitable moment when the loans came due, the bubble payments couldn't be made, and the banks suddenly lost a sizable chunk of expected income. And the s hit the f.
As home prices continue to decline and loan defaults mount, federal regulators are bracing for dozens of American banks to fail over the next year.
But after a large mortgage lender in California collapsed late Friday, Wall Street analysts began posing two crucial questions: Just how many banks might falter? And, more urgently, which one could be next?
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[T]he troubles are growing so rapidly at some small and midsize banks that as many as 150 out of the 7,500 banks nationwide could fail over the next 12 to 18 months, analysts say. Other lenders are likely to shut branches or seek mergers.
“Everybody is drawing up lists, trying to figure out who the next bank is, No. 1, and No. 2, how many of them are there,” said Richard X. Bove, the banking analyst with Ladenburg Thalmann, who released a list of troubled banks over the weekend. “And No. 3, from the standpoint of Washington, how badly is it going to affect the economy?”
Many investors are on edge after federal regulators seized the California lender, IndyMac Bank, one of the nation’s largest savings and loans, last week. With $32 billion in assets, IndyMac, a spinoff of the Countrywide Financial Corporation, was the biggest American lender to fail in more than two decades.
The result of all this financial maneuvering to get the govt out of the marginal loan-making business and privatize even the weakest of home loans has been the utter failure of hundreds of banks and a growing threat to the global economy, which is (stupidly) so interconnected that a failure in one sector threatens the stability of the others.
Ironically, an unintended consequence of this investor-class gluttony is that with the panic around the inevitable collapse, investors are pulling out as fast as they can sign the liquidation papers, leaving the very govt (well, quasi-govt) agencies the commercials wanted to supplant left as the only alternative for home loans.
The desperate worry over the health of huge financial institutions with country cousin names — Fannie Mae and Freddie Mac — reflects a reality that has reshaped major spheres of American life: the government has in recent months taken on an increasingly dominant role in assuring that Americans can buy a home or attend college.
Much of the private money that once surged into the mortgage industry has fled in a panicked horde, leaving most of the responsibility for financing American homes to the government-sponsored Fannie and Freddie.
Two years ago, when commercial banks were still jostling for fatter slices of the housing market, the share of outstanding mortgages Fannie and Freddie owned and guaranteed dipped below 40 percent, according to an analysis of Federal Reserve data by Moody’s Economy.com. By the first three months of this year, Fannie and Freddie were buying more than two-thirds of all new residential mortgages.
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In short, in a nation that holds itself up as a citadel of free enterprise, the government has transformed from a reliable guarantor into effectively the only lender for millions of Americans engaged in the largest transactions of their lives.
(emphasis added)
Which is why the Bush Admin was forced to step in to save the very agencies it had been hoping to eliminate through privatization.
Sometimes things don't work out the way you plan, especially if you're a modern conservative ideologue.
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