Who's To Blame?

by Don Boudreaux on September 22, 2008

in Current Affairs, Financial Markets, Myths and Fallacies, Reality Is Not Optional, Regulation

I don’t know if John Lott is correct in suggesting that the editorial writers for the New York Times are trying to boost Barack Obama’s prospects at the polls, but I do thank him for publicizing Steven A. Holmes’s September 30, 1999 New York Times report.  Here are some telling lines from that report – telling especially in light of the NYT‘s current claim that the today’s financial problems are the result of too little government regulation of financial-players’ "dubious practices":

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….

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.

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Oil Shock September 22, 2008 at 2:42 pm

Stephen Carson on LRC blog

The Washington Post adds some anecdotal evidence on the low support for the bailout:

"I'm worried that the taxpayers are going to wind up paying for all this," said Arlena Elbaraka, 38, who lives in the manicured neighborhood of Blooms Crossing.

"Who ends up losing from all this? Us, right?" asked Rogelio Benitez, 36, a home-improvement contractor who lives with his wife and six kids in a working-class neighborhood on the western edge of town.

"I'm not overextended," Merkle said. "I didn't buy a large home that I can't afford. I'm not behind on any of my payments. I'm not sure I want the government to take my tax dollars and buy someone else's house for them."

Then there is an unpleasant (for this reader at least) surprise near the end of the article. A lone dissenter from the widespread dissatisfaction with the latest scam (emphasis mine):

Hours of interviews in Manassas Park turned up exactly one resident in favor of the bailout, a fellow in a Harvard T-shirt in a big house near the golf course. Richard Bejtlich, 36, who works in computer security for General Electric — its stock jumped dramatically Friday when the government banned short-selling of financial securities — says he's a libertarian and normally wouldn't support government intervention. But there's no other way at this point, he says, because we're in too deep of a hole and have been too profligate.

Thank you Beltway libertarians… You have done your job well. Collect your 30 pieces of silver at the temple.

jp September 22, 2008 at 2:57 pm

LRC is an anarchist blog, not libertarian so much. Their view is predicitable and filled with wild conspiracy theory pressupositions.

Govt.(thanks almost entirely to Democrats) caused this problem, halted efforts in 2002 and 2005 to avert this problem and now here we are. Question is, should we do nothing and allow another Great depression to "correct" things.

Part of this price would be Liberal/Socialist rule of the far-Left variety for Decades to come, as they along with their media would blame it all on the Republicans. a new "new Deal" would come from it.

If Govt. should do something, since they caused it, what should they do.

Article today figuring up the cost of not doing anything at around 30 Trillion dollars.

Oil Shock September 22, 2008 at 3:35 pm


It is not about the blog, it is about a particular post. I assume you are pimping for a bail out.

I know, Republicans are better libertarians than the bloggers at LRC. :-)

-Oil Shock.

Oil Shock September 22, 2008 at 3:40 pm
Tim September 22, 2008 at 4:24 pm

I don't understand. How does the fact that Clinton was responsible for deregulating the banking industry have anything to do with whether deregulation had to do with the current situation?

Are you such a partisan Democrat/Liberal that you think anything Bill Clinton does cannot be wrong? That seems like a ridiculous position to me.

I_am_a_lead_pencil September 22, 2008 at 5:00 pm

jp said:

If Govt. should do something, since they caused it, what should they do.

Government will never shrink as long as this mindset remains. The "fix" is likely to cause more problems. GSE's were a "fix". Greenspan lowering short term rates to 1% was a "fix" for the stock bubble.

I'm quite tired of the "fixer's" madness.

Oil Shock September 22, 2008 at 5:06 pm

Clinton was so busy getting blown, didn't have the time to read through the bills he was signing. BTW, from what I have read in this blog, Don Boudreaux is not a partisan. He seems like an admirably principled libertarian, a rare breed indeed.

Ray G September 22, 2008 at 9:07 pm

I stumbled over the first sentence.

Don is telling us that he thinks that the New York Times is not pimping for Obama.

Really? !

That's beyond wrong, that's dishonest.

Sam Grove September 22, 2008 at 9:33 pm

Don is telling us that he thinks that the New York Times is not pimping for Obama.

Read it again very carefully.

Oil Shock September 23, 2008 at 1:42 am
Hans Luftner September 23, 2008 at 4:49 am

LRC is an anarchist blog, not libertarian so much. Their view is predicitable and filled with wild conspiracy theory pressupositions.

Such as?

Sam Grove September 23, 2008 at 1:23 pm

Who's to blame?

The people, for their ignorance.
The politicians, for their venality.
The politico-businessmen, for their narrow focus.
The government, for its systemic flaws.
The progressives, for advocating the busybody state.
Conservatives, for surrendering to the success of the progressives.

Babs Ryan September 23, 2008 at 9:34 pm

What about the top management (not just CEOs) of these big companies? They're responsible. They made poor decisions and blocked employees ideas to fix the problems before the meltdown. Read the press release "Why America's Goliath Companies are Collapsing" at http://www.prweb.com/releases/2008/9/prweb1363274.htm and get the new book "America's Corporate Brain Drain" which predicted this would happen at braindrain.BIZ

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