Some people are misinterpreting my goal in my set of posts today in the new "Government intervention in housing" category. I’m not casting aspersions or going on record or innuendoing. Well, maybe a little of the latter.
I’m trying to educate myself. I didn’t pay any attention to Fannie Mae or Freddie Mac or the FHA or Section 8 until a few weeks ago. It just wasn’t on my radar screen. Some people in the comments to my Forbes piece questioned the argument that the government really did lean on or pressure or require the GSE’s to help with affordable housing. So I thought it would be useful to go back and find articles written mostly in real time, not with the wisdom of hindsight, that quantified that or described it.
Think of it as an online notebook. In case I want to write something on it, these are some references I’d like to have. I thought you might find it interesting, too. If not, ignore them.
And my other goal was to begin to counter the claims of people who argue that the housing meltdown was just another case of how markets fail. Maybe. But I thought I should educate myself on government’s role in intervening. I don’t know how extensive it was. It’s certainly more extensive than I thought.
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It isn't surprising that politicians can't deal with this problem and are likely to have contributed to the problem. After all, even on an economics blog, where technical issues are discussed, the discussion quickly generated emotional and personal accusations. How can politicians, who are less shielded from those accusations than Russ, deal with a problem in that atmosphere? Why would we turn to them to do so?
Russ, is it possible to just replace "innuendoing" with "innuendo"? First, it's not a verb; second, it's already a participle in the present tense (of "innuere"). It is an eyesore.
Thanks for the information on legislation promoting the loose lending. I asked for it earlier, and you responded with a flood. The research is much needed at the moment, and I certainly don't expect it from the evening news.
The Orange County Register has a lot of good articles over the years on how the subprime loan and the "liar loan" were developed here in Southern California, with many of the leading players right here in OC. The Register also has a number of very good articles of what the result has been "on the ground" in such places as heavily minority and immigrant Santa Ana. Whole streets have been wiped out.
So, let me recommend the OC Register to your attention, for articles on how this all played out in the mortgage industry, and in one of the most highly volatile housing markets in the country (e.g. housing prices have fallen in half in one year in several Santa Ana zip codes.)
I remember catching a bit of video of Murray Rothbard talking about HUD with a video in the background showing buildings being torn down by HUD contractors.
Hello world,
vidyohs here, back from the teeth of hurricane Ike. Rode it out, lucky enough to suffer no real damage, and just back up and perking.
This is off topic but the topic so long ago was that Martin challenged me to show that Noam Chomsky is a marxist, I am sorry to put this into this new thread, but it needed to be answered:
"Noam Chomsky is an unabashed marxist, …
He isn't even an abashed Marxist.
… who if pressed would admit to expressing admiration for such as Stalin, Castro, and Mao; admit it or not his admiration is a matter of record through his own ideas.
O.K. Let's see this record.
Posted by: Martin Brock | Sep 12, 2008 11:39:05 PM"
Here you go martinduck:
http://www.reason.com/news/show/36575.html
http://www.reason.com/search/results/?cx=000107342346889757597%3Ascm_knrboh8&cof=FORID%3A11&q=Noam+Chomsky&sa=Search#923
http://libertyunbound.com/archive/2005_01/fox-chomsky.html
Rivkin recalled many years later the shock that Chomsky expressed in 1955 when he told him that he was going to accept a position at Hebrew Union College in Cincinnati and that he was talking about the future of capitalism rather than class struggle. "I thought he was going to drag me into the Charles River," Rivkin recalled. "Noam's focus was on the evils of our system. I could understand why he would raise questions," Rivkin said, but "I could not understand why he would get angry." But then the followers of Marx were known for their intemperate expressions, as when Marx referred to Ferdinand Lasalle, the German Social-Democrat, as "Nigger Lassalle."
———
Now I know you'll head straight for the mulberry bush, martinduck, and I am not going to chase you there.
My lovely little city by the sea has one of the 5 Pacifica (communist) radio stations, so I can hear Chomsky give lectures every now and then. I listen because I want to know what a true broken brain sounds like, and Chomsky is a marxist broken brain on steriods.
Of course the penny described in the Coinage Act of 1794 isn't described exactly as you think it should so that negates all the facts of dollar discription and standards, as I am sure you'll find some reason to reject the above documentation of Chomsky.
Have a nice weekend duckie.
I ran across a couple of excellent background articles,
http://www.city-journal.org/html/10_1_the_trillion_dollar.html
and http://johnrlott.tripod.com/op-eds/FoxNewsMortgagesReg091808.html
Vid,
I bothered to read your first link, even though you state categorically at the outset that you have no interest in counterargument. The article quotes Chomsky saying the same things about 9/11 that Ron Paul says, and you think "Marxist" as though the word is a general epithet denoting any critic of U.S. nationalism.
Chomsky often opposes U.S. foreign policy and what passes for "capitalism", and he will occasionally say nice things about Vietnamese villages; therefore, he must be a Marxist ideologue in your way of thinking, though your sources don't support this vague allusion, and to be fair, the first Reason article doesn't even mention Marx at all. The allusion to Marxism here is simply a figment of your imagination, something you reflexively read into any statement critical of some icon of your own ideology.
This is your meaningless denial reflex. You believe precisely what you want to believe, and you're oblivious to any counter-assertion. That's why you persist in believing that gold and silver are defined as "money" in the Coinage Act of 1792 despite the Act's explicit description of copper tokens of unspecified purity not backed by silver or gold. You simply cannot see evidence contradicting your own assertions, so you're stuck in your own ideological Wonderland. So is Chomsky at times, no doubt. People generally are like that.
I'd like some answers on the question of credit default swaps on corporate bonds vs. mortgage backed securities. See the Zero Down! thread. Are mortgage backed securities are only a distraction from credit default swaps on corporation bonds?
If credit default swaps on corporate bonds are supposedly worth more than the corporations themselves, what does that say about the nominal value of the corporations? I'm skeptical of this assertion in the Morgenson article, but I definitely want to know how true it is.
Editing: Are mortgage backed securities only a distraction from credit default swaps on corporate bonds?
The greatest lie is that the markets were free. Is a young boy allowed by his father to roam around only in the company of a governess really free? Of course not…and so don’t tell us that what we have now, the banks having to put up capital in accordance to what the quite volatile risk kommissars opine, is a free financial market!
It was the financial regulators who cocked the gun by empowering the credit rating agencies to exploit the market of risk information as a monopoly and, of course, as had to happen, sooner or later, the gun went off.
And now they want us to ignore it. Imagine, in the editorial of September 19 titled “Central banks: a survival guide” even the Financial Times writes, without blushing, about the “follies of a generation of irresponsible financiers” … as if that’s all there is to it.
By his words and acts he shall be known, and I am talking about you martinduck, no Chomsky.
I will make one feint just to get you headed around the bush again.
Google the name Noam Chomsky and you'll get a very high number of sites to look at, and every single one of them label Chomsky at a minimum as the leftist linguist.
What I referred you to above was just a casual sample of the material availble for verification.
Off you go duckie.
He has words. They just aren't Marxist.
Sure. Just one more.
Google "Friedman", and you'll find countless web sites labeling a man "right wing fascist" and the rest. Google "Ron Paul", and you'll find "nut case", "racist" and countless other epithets. Why should I care about your mindless labels. Show me Chomsky calling himself a "Marxist" or advocating a dictatorship of the proletariat or central planning. You won't. You'll just link more irrelevant web sites.
That's not all there is to it, but there's plenty of that to it. "Free market" is largely a political slogan, but the financiers know the game they're really playing all too well.
Russ, at it's core there are two issues here. Wall St engaged in the classic borrow short/lend long pitfall where they used repo funding (short-term asset backed paper) to fund long-term mortages. When the repo funding dried up the market tanked. In addition, there was a case of market failure in that it's the classic case of info economics when it comes to all the alphabet soup of wall st innovations (SPV, SIV, CDO, etc)…information assymetry, adverse selection, principal-agent that led to this mess occurred in the securitization process. The entire daisy mortgage chain became too complicated and entangled to the point where there is no real market price for these securities nor a price discovery mechanism.On the whole, this is not really complicated; we've been here before.
But that's not a "market" failure.
It's what we expect from any association between government and business.
The finance industry has and is perhaps the most highly regulated industry…even with several rule changes that are hysterically pointed to as "deregulation".
That's without even getting into the malfeasance of the central bank in all this.
The government has been avoiding bankruptcy and tax increased via credit expansion and currency printing. But the government can't go bankrupt, therefore the ills must spring up in the "private" sector.
No bright line distinguishes a "public" from a "private" sector, because "private" transactions are always subject to laws decreed by the "public" sector, including fundamental property rights. "It's all the government's fault" is in some sense always true, but this statement implies no innocence in the "private" sector.
Apparently, AIG's problems don't stem from political pressure to write subprime mortgages or pressure to securitize these mortgages. AIG didn't buy the securities. It insured them against default by selling swaps, and I've read nothing suggesting that anyone held a gun to their head or encouraged the swaps in any way.
By all accounts, the risks posed by these securities as a consequence of the pressure to write subprime mortgages was well known. Acts of Congress and committee hearings and records of HUD's "community lending" goals are all public records, far more public than many factors affecting a corporate bond's risk of default, and AIG apparently sold swaps on many of corporate bonds too. Understanding these risks is an insurer's job after all.
I believe that statesmen pressured banks, Fannie and Freddie to support subprime lending, but the pressure was all very public, and I've seen no evidence that anyone AIG pressured AIG to sell the swaps. Does this evidence exist? If not, then regardless of the source of the risk, pricing it was a "private" matter.
Maybe AIG sold swaps simply assuming that Congress would back the bonds ultimately, even though it wasn't lawfully required to back them. If so, rewarding this bet with a bailout sets a terrible precedent.
If Uncle Sam buys a mortgage backed security covered by a credit default swap sold by AIG, I suppose AIG's assets are still liable if the mortgages backed don't cover the principal and interest due on the security, but what about all the swaps insuring corporate bond holders? Uncle isn't buying those, I hope, but it is providing this line of credit essentially absorbing some the risk.
There is very little to show for, having followed the wimps of Basel.
The dotcom explosion at least propelled that sector forward much faster than what would otherwise have been the case, but the current crisis, what does it have to show for itself? … overextended consumers and millions of people who moved in into their homes only to be evicted a couple of months and many tear later…not much.
And all this was the results of the extreme risk adverseness of the financial regulatory wimps of Basel; that thought their only mission in life was to drive out the risks of default in the financial system; and arrogantly thought themselves capable to do so; and to that effect created minimum bank capital requirements based on risks measured by their outsourced risk kommissars, the credit rating agencies.
And the credit rating agencies gave AAAs to securities backed by transparent an easily understood plain lousy mortgages to the subprime sector; and the markets followed those signs… and here we are.
No friends, financial regulation is much too serious to be left in the hands of the members of the mutual admiration club of financial regulators. If we are going to waste taxpayer’s money let us at least assure that the crisis we pay for are worth it.
1999 article for you Russ….
Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES
Published: September 30, 1999
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.
''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''
Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 — a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.
Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.
In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.
Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.
In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.
The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.
Link:
Really, most lefties aren't explicitly "Marxist." Heck, people say that Marx wasn't a Marxist. The reality, though, is that the left, especially the ivory-tower left, invents and discards new ideological variants of Marxism on a fairly routine basis. It's all the same crap with varying amounts of paranoia, envy and nihilism mixed in.
You may characterize any vague assemblage of assertions you like as "Marxism" or "the left" or "ivory-tower left", but more careful thinkers reserve "Marxism" for all of the ideas specifically espoused by Marx; otherwise, one could call John Locke, Adam Smith and Milton Friedman "Marxists".
And some sloppy thinkers do.
Milton Friedman the Socialist
No bright line distinguishes a "public" from a "private" sector,
which is precisely why I put " marks around private.
To my mind the historical dialectic is probably the most prominent feature of Marxism. All the class warfare, reflexive anti-Americanism (because her existence refutes Marxism), radicalism and such derive from that belief in constant conflict and an almost predetermined progress through stages of civilization.
Am I being sloppy? Well, diminishing marginal returns applies to philosophy just as it does any human endeavor; postmodernism is ample proof of this. It's true that there are many competing interests and issues that make the political dynamic quite complicated and some people will absolutely refuse to stay in their little boxes. But, at any given moment in history, most of the population is clearly "left" or "right."
Regarding Chomsky, the only correct answer is that he's Chomsky. But most people aren't groundbreaking linguists / philosophers / etc. Most people's ideology really is just a "vague assemblage of assertions." There's no good reason not to treat it otherwise.
Yes. You toss around faddish terms like "post-modernism" and vaguely associate them with Chomsky without ever specifying a single word Chomsky himself ever wrote.
No. These terms are nonsense. There is no one dimensional political spectrum at all. The idea is an artifact of reflexively dualistic thinking and statist partisanship. I can posit some forcible propriety that you've never seen before, and you can drop it into one of your two simple categories, depending on your own partisan identification and personal preference, but the categories mean practically nothing.
Right. If you, like Vid, want to call Chomsky a "Marxist", you should provide some evidence that he embraces most of the specific ideas espoused by Marx or at least that he identifies with some of these ideas by explicitly associating himself with Marx.
Like Vid, you don't. You just go on about "anti-Americanism", as though two people disagreeing with some nominally "American" idea must agree with each other. The idea is nonsense. Two people can disagree with George W. Bush and also simultaneously disagree with each another.
People with a superficial understanding of Proudhon will also label him a "socialist" in modern terms and even a "Marxist", but Marx himself vehemently disagreed, and I suppose Marx speaks with some authority about who qualifies as a "Marxist"; otherwise, the term is just a mindless epithet that particular partisans toss around in their ideological choir.
Sure. Yours is no exception. Chomsky is a polemicist, but he's not a Marxist, and his thinking is certainly more precise than what often passes for "the right" or "conservatism". Chomsky argues rings around Limbaugh. This observation doesn't imply that I agree with everything, or with anything, Chomsky says. He's just a much more intelligent polemicist than Limbaugh.
However, it is possible to discern philosophical influences in the utterances of people. Lots of people acquire opinions like acquire bacteria, from their surroundings.
Many people express anti-corporate sentiments without awareness of why they hold those sentiments.
Marxism has had a certain impact on the way many people think, including those who are reflexively anti-Marxist.
While I have refrained from calling muirgeo Marxist, I have identified certain Marxist strains in his expressions, such as his reflexively anti-corporate attitude and support for government provided health care (though I tend to think that more "progressive" and modern progressivism seems to have some Marxist seasoning).
I doubt that Marx ever said anything about government provided health care, except insofar as providing health care requires means of production, and Marx wanted all means of production organized by state planners.
A universal entitlement to health insurance doesn't even imply state ownership of health care resources, although it could be a step in this direction. Automobile liability insurance is practically universal, as a result of state mandates, but the car insurance industry isn't state owned.
The identification of a "social safety net" or welfare state with Marxism is laughably ahistorical. The welfare state was and still is a liberal, even a classically liberal, reaction to Marxism by opponents of Marxism.