Reason #1 why Newt Gingrich is a little bit frightening

by Russ Roberts on December 8, 2011

in Housing, Politics

By the title, I don’t mean the most important reason. Not sure what that is. This is just the first reason I’m listing. Maybe I’ll list more. And it turns out this reason is multi-faceted.

Reason #1 comes from a blog post by Josh Barro who digs up this interview with Gingrich. It’s not exactly an interview. It was conducted by Freddie Mac (whatever that means) and posted on Freddie Mac’s website.

There are many things that are frightening about Gingrich’s remarks. First, they are for Freddie Mac who paid him something around $1.6 million for his “services.” He described this work originally as being payment for his historical knowledge of housing. Cue laughter, folks. This interview gives you a glimpse of the real reason he was hired. He was hired, of course, to provide cover for Freddie Mac. Freddie Mac was a GSE, a government-sponsored enterprise. A GSE was quasi-private or quasi-public, take your pick. Freddie (and Fannie Mae) bought mortgages from originators and brokers. They provided “liquidity” for the housing market which is a fancy way of saying that they increased the amount of credit available. For a long while, they were relatively benign.

Because they were thought to had an implicit guarantee of government support, they were able to issue bonds at relatively low rates of interest. They were very eager to use that money to buy more mortgages. The problem was that because of that implicit guarantee, they were constrained by regulation to only buy fairly safe mortgages with 20% downpayments. Starting in the mid-1990′s, Clinton (and then Bush) required them to relax their standards. They didn’t end up buying a lot of sub-prime, just a lot of low down-payment mortgages that were very prone to end up underwater if housing prices ever fell. This injection of credit into the market pushed up the price of housing (starting around 1995) launched the housing bubble and along with other government programs, helped make speculative subprime lending.

The alternative view is the animal spirits view that suddenly, around 1995, people began to believe that housing was a particularly good investment. But for this discussion, the cause of the bubble is irrelevant. The important point is that Freddie and Fannie began to make increasingly risky loans, encouraged by their regulators. (See Figures 6,7, and 8, here.) A number of economists on the left and right began to worry that the taxpayer might end up on the hook for those loans if they ever blew up. They did blow up. The bill is $150 billion and counting. But because political pressure began to build against Freddie and Fannie, they pushed back. They hired people on the left (Stiglitz and the Orszags) to do research showing how safe the GSE’s were. And they hired people on the right like Newt Gingrich who could claim conservative credentials and a really good Rolodex to reduce the pressure to reign in Freddie and Fannie.

So the first frightening thing about Newt is that he worked for Freddie Mac at all. The second frightening thing is that he lied about it, pretending it was some sort of research position. But the really frightening thing is what he actually said in the name of making people feel good about these so-called government-sponsored entreprises which led to private gains and socialized losses. The worst kind of cronyism.

Read the whole “interview.” It’s short and you gives you a flavor of how Gingrich invoked conservative rhetoric to support Freddie Mac politically. But the highlight for me is this part:

Q: A key element of the entrepreneurial model is using the private sector where possible to save taxpayer dollars and improve efficiency. And you believe the GSE model provides one way to use the private sector.

Gingrich: Some activities of government – trash collection is a good example – can be efficiently contracted out to the private sector. Other functions – the military, police and fire protection – obviously must remain within government. And then there are areas in which a public purpose would be best achieved by using market-based models. I think GSEs provide one of those models. I like the GSE model because it provides a more efficient, market-based alternative to taxpayer-funded government programs. It marries private enterprise to a public purpose. We obviously don’t want to use GSEs for everything, but there are times when private enterprise alone is not sufficient to achieve a public purpose. I think private enterprise alone is not going to be able to help the Gulf region recover from the hurricanes, and government will not get the job done in a very effective or efficient manner. We should be looking seriously at creating a GSE to help redevelop this region. We should be looking at whether and how the GSE model could help us address the problem of financing health care. I think a GSE for space exploration ought to be seriously considered – I’m convinced that if NASA were a GSE, we probably would be on Mars today.

Gingrich says that the GSE model “marries private enterprise to a public purpose.” What we have learned is that that doesn’t work very well. But that’s not the most frightening part of the quote. And the most frightening part isn’t that this “interview” took place in April of 2007, when Freddie and Fannie were totally out of control, lending out money to buyers putting less than 5% down in record numbers, money that would not return as expected.













No, the really frightening part of this interview is the last part, when Newt goes off the deep end and says something grandiose, meaningless, and frightening:

I think a GSE for space exploration ought to be seriously considered – I’m convinced that if NASA were a GSE, we probably would be on Mars today.

What could that possibly mean, a GSE for space exploration? I think what he means is that it would be nice to have some incentives at NASA. How would that work? What is the GSE equivalent of Freddie Mac for NASA? It would be an agency that would buy up loans to fund space travel? No, that doesn’t make any sense. But the truth is, I have no idea how to make sense of it. And then the part where he’s “convinced, that if NASA were a GSE, we probably would be on Mars today.” Convinced? How do you convince yourself of something like that? And what does he mean by “be on Mars today.” We’ve already sent probes to Mars. We just sent another one the other day. I assume he means a person. Maybe he means the interviewer and himself. Probably not. But who knows? And why would “being on Mars” be a good thing? Wouldn’t it be incredibly expensive whether it was done by NASA or a NASA GSE? Is that a good goal? Why?

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GAAPrulesIFRSdrools December 8, 2011 at 2:22 pm

Please don’t use the word “probe” in a post about a politician, it conjures up so many disturbing mental images.

Alexander December 8, 2011 at 2:27 pm

I do not follow you, it seems that you are fishing out Newt. I did not find anything frightening,

Irving2Smokes December 8, 2011 at 3:21 pm

This isn’t frightening? “We should be looking at whether and how the GSE model could help us address the problem of financing health care.”

anthonyl December 8, 2011 at 9:01 pm

Ur used to this kind of diarrhea of the mouth.
He means it’s economically pointless to go to Mars. Only a government that has interest in its own glory would do such a thing.
It’s like going to war, ultimately a pointless exercise.
What is the point of doing something more efficiently if it wasn’t worth doing at all?

Stone Glasgow December 9, 2011 at 8:32 am

Russ seems to be ranting a bit here. Newt is just another Big Man talking out of his ass to please the men who pay him to spew propaganda and change laws in their favor. He’s no different from any other politician.

Whotrustedus December 8, 2011 at 2:27 pm

A NASA GSE that sent Newt to Mars and left him there would be very good thing! :-)

Ryan Vann December 8, 2011 at 2:29 pm

Much too funny. Seriously though, is anyone around here good at grant writing?

Ryan Vann December 8, 2011 at 2:28 pm

Would someone give this guy the Fox News show he wants already?

katy lavallee December 8, 2011 at 3:31 pm


cthorm December 8, 2011 at 2:33 pm

He is frightening and he is completely backwards on Mars.

Yes, if we did not rely on NASA for space exploration we probably would have done a lot more exploration on Mars so far (probably not a manned landing, unless it was a suicide mission like the Soviets had planned).

NASA is not constrained by an insufficiently clear mandate, it’s constrained by insufficient competition. Private companies like SpaceX are going to be sending satellites into low earth orbit (as far as the shuttle ever went…) for about 1% of what it cost NASA. This commercial cash stream will fund development of more efficient launch technologies and make satellite communications much more reliable. Once low earth orbit is affordable, it’s not such a big leap to establish a permanent presence on Mars, Phobos/Deimos, or our own moon.

Price B December 8, 2011 at 2:33 pm
Alan Watson December 8, 2011 at 3:34 pm

You say that “Starting in the mid-1990′s, Clinton (and then Bush) required them to relax their standards.” But it was the Housing and Community Development Act of 1992, signed by Bush 41, that first required the GSEs to buy at least a specified portion of their mortgages from low- and moderate-income buyers.

g-dub December 8, 2011 at 3:51 pm

Both republicans and democrats have pumped home ownership. It is always bad. I think the democrats started it way back in the ’30′s, but it doesn’t really matter. It is wrong, and it finally blew up.

Russ Roberts December 8, 2011 at 8:39 pm

Good point. I always think of Clinton because in ’95 he announced the National Home Ownership Strategy with a goal of achieving 70% homeownership up from 65%, jacked up the requirements on Fannie and Freddie. It got up to 69% and change eventually (Bush II increased the requirements dramatically as well.) But yes, it started with Bush I.

Frank33328 December 8, 2011 at 3:35 pm

The scariest thing about candidate Gingrich is what Michele Bachmann said the other day, that he is a fiscally conservative socialist. I would say a socialist of the fascist variety but she was essentially correct since she did not specify. Dictating public use of private property while leaving it in private hands is exactly what you would expect. I am guessing that is what he means by a GSE for NASA. (BTW, I am not a fan of candidate Bachmann either but she was spot on with her estimation of Gingrich.) .)

WhiskeyJim December 8, 2011 at 3:45 pm

A GSE for space exploration… I think he means we would have went to Mars and then blown up the planet, requiring us to bail out a rescue ship.

But seriously, name a politician that is not scary.

If he is interested in controlling government spending, I am in. Anyone who tells me they can fix stuff by spending money is out. That’s all.

Everything else is BS.

JFF December 8, 2011 at 3:52 pm

“Other functions – the military, police[,] and fire protection – obviously must remain within government.”

Obviously, why? Because the power of the state shall not be undermined?


In a free society, these services could all be provided by the private sector in the same way trash collection could, via voluntary community agreements or insurance policies. See Murphy, Block, Hoppe, et al.

Jon Murphy December 8, 2011 at 3:52 pm

At the risk of derailing this conversation (and incurring further wrath), I find it interesting that conservative voters find an admitted adulteror who is in favor of big government to be more acceptable than a devoted family and church man like Mitt Romney or Ron Paul.

Just an observation.

Methinks1776 December 8, 2011 at 4:50 pm

I guess I don’t qualify as a conservative, but I don’t give a damn if he goes to church and is a devoted family man or not so long as he doesn’t force me to worship in the Church of Big Government and become a ward of the Federal Family.

Slappy McFee December 8, 2011 at 5:20 pm

What should bother you more is that ‘conservatives’ cling to their Social Security, Medicare, war mongoring and nationalism just as much as ‘progressives’ do.

That’s* why RP doesn’t get any love.

*and he’s 147 years old

Dan J December 8, 2011 at 5:33 pm

I only object to Ron Paul’s foreign policy. Only because I can neither feel confident that it is one to embrace or to be frightened. Have open borders and not be concerned about nuclear weapons? I can’t say with certainty that people like Iranian regime would or wouldn’t try to use it on Israel or smuggle to US thru Venezuela and on up. But, I don’t want to find out.

ThomasL December 8, 2011 at 5:47 pm

The problem with RP on this, and some of the other dove libertarians, is that they don’t take the position that Iran with nuclear weapons is a Bad Thing, but all the alternatives are even worse.

Instead they say they insist it isn’t a big deal, Iran [or fill in the blank unfriendly country] is really friendly at heart, they are only acting this way because we poke them constantly, etc, etc.

It has the same flavor of Utopianism on an international stage that infects OWS-types on the national one.

I’d feel much more comfortable with the judgment of someone that said, “Yeah, that’s awful. Not much we can do though,” vs someone that doesn’t see why it might be a problem.

ThomasL December 8, 2011 at 5:54 pm

The above isn’t an endorsement of standard “conservative” foreign policy, incidentally.

I think there is ground to be found between seeing enemies everywhere and insisting there is really no such thing as an enemy.

However that plot of ground is strangely vacant…

Sam Grove December 8, 2011 at 6:34 pm

Observing that the U.S. has refrained from invading or attempting to invade any nation with nuclear weapons (N Korea), an objective observer might be inclined to advise Iran to acquire same.

One might also wonder why, with the dissolution of the Soviet empire and dispersion of at least some of their nuclear weapons, why none have been set off.

Sam Grove December 8, 2011 at 6:35 pm

insisting there is really no such thing as an enemy.

Who makes that claim?

stedebonnet December 8, 2011 at 11:57 pm

The spread of nuclear weapons isn’t a bad thing. But its not because the countries are friendly at heart, etc. Adversary states that proliferate deal with each other more cautiously. Weapons promote stability (both world and regional), make conventional war less likely, and have arguably contributed to peace.

I would advise checking out Kenneth Waltz’s pieces on the subject. Its not unsound emotional reasoning (kinda what you suggest) that necessarily leads to this conclusion. An adoption of a tight realist argument, and understanding how state’s behave can also lead to this conclusion.

ThomasL December 9, 2011 at 5:17 pm

The spread of nuclear weapons isn’t a bad thing. But its not because the countries are friendly at heart, etc. Adversary states that proliferate deal with each other more cautiously…

Yes, this is more or less the position I am disagreeing with. Not because I disagree with the truth of the statement. On the whole, I think it is true. In this context it is also a logical fallacy. It argues evidence of a general rule as evidence for a specific case.

I also believe that on the whole more guns in private hands makes for a safer populace. That has nothing to do with me pointing at someone and saying, “But no one is made safer by that guy having one.”

Maybe there is nothing that can be done to keep the guy from having the gun. I accept that is often the case. But someone telling me that guns make people safer so I shouldn’t worry about him having one is nonsense; exactly the same kind of nonsense as if I tryied to use the single crazy guy with the gun as evidence that no one should have one.

Sam Grove December 8, 2011 at 7:12 pm

I can’t say with certainty that people like Iranian regime would or wouldn’t try to use it on Israel

Do you suppose Iranian leaders are stupid or suicidal?

Dan J December 8, 2011 at 8:14 pm

Depends on just how committed they are to their stated goal, announced many times over of destruction of Israel and the West.
The lesson from Russia and US Cold War is the mutual destruction disincentive and the instability of communism or other centrally planned economies to continue a spending spree in arms.
But, I give credence to the theory on the geopolitics of an Iranian nuclear threat. The rest of the community in Mideast will acquiesce to Iranian demands out of fear.
When someone with a gun tells me they are going to kill me, I believe it and take a course of action to eliminate the threat.
And, much of this is train of thought will be in assuming US GOVT continues the anti-freer market policies in US leaving us vulnerable to OPEC or any other cartels. Also, leaving us vulnerable to continued capital investment in places other than here.
Much investments will be made where money is to be made, like China, India, etc.,…don’t have a problem with it….. But, much investments and growth would continue in US should these burdensome regulations, taxations, rules, GOVT mandated labor costs, etc.,… Were reduced and/or eliminated.

Sam Grove December 8, 2011 at 8:35 pm

Israel has not shown reluctance to take out any manifest threat.
Should Israeli government get even a whiff that Iran might attack, you can bet that Iran will lose in the draw.

Arabs are well known for rhetorical extravagance.

Dan J December 8, 2011 at 10:03 pm

They may. Your right. The Obama response to Israel is concerning.
And, indeed puffing out your chest and showing your teeth is classic of authoritarians.
But, authoritarians are testing the waters. And, when they are given a punch in the nose, they act out some of their rhetoric.

GAAPrulesIFRSdrools December 8, 2011 at 11:37 pm

I think there is ground to be found between seeing enemies everywhere and insisting there is really no such thing as an enemy.

However that plot of ground is strangely vacant…

Of course. Almost any other country is a potential enemy or friend and nobody is clairvoyant.

JoshINHB December 9, 2011 at 1:12 am

Maybe we the general consensus that MAD kept the Cold War cold is a misreading of the situation. Maybe the cold war was mostly cold because the adversaries did have any territorial claims against each other and the source of the conflict was ideological. With both sides earnestly believing that time was on their side because of the inherent superiority of their ideology. Leading each side to take a basically defensive strategy and wait for the other side to collapse from it’s own internal contradictions.

MAD may not be effective in future conflicts driven by religious extremism, territorial claims, competition for resource or plain old nihilism.

Military history if full of episodes where a weaker party thought that they had a temporary advantage and best attack before their window of opportunity closed.

vance armor December 12, 2011 at 5:02 am

The last time that a nation invaded and was engaged in hostilities in six countries at one time was Germany, 1940. The United States of America/Progressive Empire is the world’s most dangerous rogue state — bar none.

vance armor December 12, 2011 at 5:08 am

What would Herbert Spencer have said about U.S. foreign policy today? What would Ludwig von Mises have said about U.S. foreign policy today? What would Frederic Bastiat have said about U.S. foreign policy today? What the hell is wrong will all of you Cold Warrior/Clash of Civllization/Straussian warmongers?

Price B December 8, 2011 at 5:33 pm

Conservatives are as inconsistent as progressives… They’ll have free trade when it means exporting, sound money when it comes from China, open immigration for educated immigrants, small government when it means lower taxes, and bigger government when it’s “pro-business” and “pro-church”. Then they deride Ron Paul for being crazy.

I’m not looking forward to this election. I want Gingrich to win slightly more than I want to staple my hands to this desk.

MWG December 8, 2011 at 7:10 pm

I’m not sure what I want to see more. A one-term Obama or the juicy tears of the republican mob. As a libertarian, I’m pretty use to disappointment, but it will be enjoyable watching at least one group of statists lose an election. Does it really matter if they have an ‘R’ or a ‘D’ after their name?

Dan J December 8, 2011 at 8:21 pm

Well, there will never be a Libertarian utopia. So I guess it is best to just complain till you cannot breath to exhale complaints anymore. I prefer to push for a public discourse between Libertarians and The likes of Conservative Republicans, rather than the current frame of Progressives’s socialism/communism and the small big GOVT Republicans with Libertarians trying to push their way thru the crowd yelling out loud whilst few pay attention.

Sam Grove December 8, 2011 at 8:36 pm

There will never be a utopia, libertarian, conservative OR progressive.

In fact, a utopia would be very bad for humanity.

GAAPrulesIFRSdrools December 8, 2011 at 11:40 pm

There will never be a utopia, libertarian, conservative OR progressive.

In fact, a utopia would be very bad for humanity.

Among the wisest observations made here. Play it again, Sam.

Scott December 9, 2011 at 7:40 am

I think the bailout terms would have been more punitive if there had been a democrat in power, instead of a republican. It might just be wishful thinking though. Seems like the terms for bailouts have been way more punitive in the EU and definitely in Iceland.

MWG December 9, 2011 at 12:04 pm

I don’t know where I suggested sitting around in complaining, but whatever. If you think some sort of ‘alliance’ with ‘conservative republicans’ (whoever they are) will help you sleep at night… I think that makes you part of the problem (see PATRIOT ACT and foreign adventurism).

vance armor December 12, 2011 at 5:10 am

Even Hayek urged that we at least imagine a “liberal utopia.”

mcwop December 8, 2011 at 4:20 pm

My new campaign slogan for 2012 is “Gabbo is Coming!” (Simpsons Episode 81). Pretty good slogan for Obama, but Newt really fits the mold. I wonder who pulls his strings.

EG December 8, 2011 at 4:35 pm

Its not “frightening”. Its typical big government. Newt ain’t the man the “Tea Party” should be looking at.

Methinks1776 December 8, 2011 at 4:51 pm

Except to keep an eye on him ;)

eriks December 8, 2011 at 4:55 pm

I find it all pretty unimpressive, but his most recent debate response to his “employment” at Freddie is really dissapointing. I’d find it so much more encouraging if he, or other politicians in his situation, would just say something along the lines of, “yep, I really missed the boat on that one.” I mean, it’s not like he was the only one sipping the real estate kool-aid. And I don’t neccessarily blame him, but the electorate who crucifies politician’s for admitting mistakes. Conservatives, who are opposed to and skeptical of central planning, should especially be sympathetic to that sort of humility.

Slappy McFee December 8, 2011 at 5:16 pm

Looks like its back to supporting my 2010, 2008, 2006… candidate

Vote for Pedro!!

Dan J December 8, 2011 at 5:24 pm

Indeed, his lack of a quality response to his firm working for Freddie is disappointing at best and troubling at worse.
But, I will take any of the candidates as president for four years instead of Obama.
Newts articulation and debate, Romney’s crossover appeal, Paul’s free market and Originalist (Constitution) principles, Bachman and Cain’s commitment to restructure of tax code (lowered with higher difficulties and greater political consequences for raising), Rick Perry’s……… Um……. Uh……… Money backing?………are everything to pack into one candidate.
All I want, at very least, is Obama out.
Paul would bring most changes. Newt would be next. And, then Bachman….. Not saying changes would be big or for the best….. Only that others would bring about more GOVT growth than the aforementioned three…. But, all would be less than Obama.

Invisible Backhand December 8, 2011 at 5:28 pm

85% of the mortgages were private label, not Fannie and Freddie, but that doesn’t matter. The narrative must remain that Fannie and Freddie caused the world economic crisis.

Russ Roberts December 8, 2011 at 6:06 pm

That’s why I mentioned that they weren’t buying subprime. But they helped create the possibility of subprime by pushing up housing prices between 1995 and 2002. And they poured a lot of money into the market between 2002 and 2007.

Ted Levy December 8, 2011 at 5:35 pm

“Freddie Mac who paid him something around $1.6 million for his “services.” He described this work originally as being payment for his historical knowledge of housing.”

Russ, you’re being awful cynical here. Everyone’s aware of the seminal work Gingrich did on the history of housing. Why, just Google it and you’ll see…ahem…hmmm…I thought I’d find it here…well…

Chucklehead December 9, 2011 at 1:38 am

Let he who as turned down $1.6 million from a client he didn’t agree with philosophically, cast the first stone.

Salt Water Economist December 8, 2011 at 5:50 pm

memo to self

remain on message

say nothing about Newt until conclusion of 2012 RNat’l Convention

Dances with Wolves December 8, 2011 at 5:50 pm

In order to sustain the housing bubble, smaller down payments would make sense. If the prices are sky high, there would be no way for most people to afford a home unless they could put less down.

So, it was to the benefit of the lenders, real estate developers, and real estate agents, etc. to keep the bubble going for as long as possible and even to convince themselves that it won’t all collapse suddenly. Many people saw the writing on the wall and cashed in their chips ahead of time. I know some of those people; they were developers who live in big mansions in Beverly Hills. They now cash rental checks for a living. But, bubbles bring out the greedy worst in people.

There was arrogance on the part of some property owners during the bubble. They were making money (on paper) without lifting a finger. That is what capitalism is really all about in case you haven’t a clue. If you didn’t get in on the ride, that was your tough luck. In that sense, it is harder to feel sorry for some of those that went bust when the housing market crashed.

It is the job of the economics and finance profession and others to recognize a bubble when it is starting and underway. I think, for the most part, the relevant professions failed. The failure was palpable even with regard to the head of the Fed, Greenspan. He said that their was “froth” in the housing market. What a loser. So, they were many bad actors in this financial mess, but econ professors have to shoulder the blame, too, some more than others. Right-wing and libertarian economists are the most to blame because they almost always like fewer regulations and fewer government watchdogs because they despise and distrust government and bureaucrats. Don’t worry your tenured positions are safe, but they probably shouldn’t be.

Newt is a scoundrel for sure, but he is aided by many conservatives and other self-serving wrongdoers in government, the media, and in academia. It is time to clean house, and I don’t mean just the filthy foreclosed homes.

Dan J December 8, 2011 at 6:07 pm

Tired of goin over this one. GOVT meddling was causation. Financial institutions that did not approve loans at GSE standards, meaning there are none, were threatened with discrimination lawsuits. GOVT declared that welfare was to be included in income calculations. GOVT used subjective stats to determine that lenders were discriminating and must ‘change’ the stats or face federal GOVT persecution.

Price B December 8, 2011 at 6:42 pm

DWW- Newt is a scoundrel, otherwise you’re missing a few key questions.

Should someone who can’t afford a home at a free, fair, and open price, buy a home?

Is inflated homeownership an example of allocating resources efficiently? Is homeownership a public-good?

Are politicians less corrupt than bankers?

Also, you contradict yourself: “Capitalism is about making money”
“It is the job of finance/econ professors to identify when we’re in a bubble”

Sam Grove December 8, 2011 at 7:10 pm

And you are mistaken that libertarians like fewer regulations.

Libertarian prefer and advise NO regulations except prohibitions against fraud, theft, and aggression.

Other regulations are competition limiting in that they tend to favor existing firms over new comers.

Dan J December 8, 2011 at 10:17 pm

While I agree (assuming) that housing, as other products and services, should not be subsidized or the market distorted in other ways by GOVT, good intentions or not, I am not sure if such a freer market can exist. I assume such meddling and distortions will continue due to the very nature of elected officials positions of power.

Sam Grove December 8, 2011 at 7:07 pm

So, it was to the benefit of the lenders, real estate developers, and real estate agents, etc. to keep the bubble going for as long as possible and even to convince themselves that it won’t all collapse suddenly.

But not good for economic stability.

Right-wing and libertarian economists are the most to blame because they almost always like fewer regulations and fewer government watchdogs because they despise and distrust government and bureaucrats.

So the meltdown occurred because these people LIKE fewer regulations?

Non sense.

There were NOT fewer regulations.

Cari Beth December 10, 2011 at 9:16 pm

Sam, you are correct!

There really was no such thing as fewer regulations. There was an average of 74 new regulations every year through the mess and the few de-regulations that were touted really had little effect.

The de-regulation argument really does not stand.

eriks December 8, 2011 at 7:41 pm

“It is the job of the economics and finance profession and others to recognize a bubble when it is starting and underway.”

It’s hard to have a bubble if people recognize it. Is there a commodities/metals bubble now? What about treasuries? Won’t they eventually crash? Definitely…err… probably….maybe? Bubbles are obvious in hindsight, but very difficult to bet against in process.

And besides, I don’t think it’s necessarily the “job” of people in the finance profession to recognize bubbles. They’re rewarded most handsomely for meeting the demand of their customers and shareholders, which is always on the buy side of bubbles. As in the tech bubble, and I’m sure other bubbles before it, the naysayers were quickly voted out. A friend of mine who manages money was recently complaining about clients who were constantly harassing him to buy precious metals despite his misgivings. Eventually they’ll find a new manager who shares their bullish tendencies.

El Diablo December 8, 2011 at 9:41 pm

Marxist With Fake Indian Name For Fictional White Man,

Thank you for eloquently proving the stupidity of leftists.

See you soon!

Russ Roberts December 8, 2011 at 6:08 pm

Right. No blame for the liberals who pushed home ownrship policies relentlessly or the liberal economists who carried their share of the water.

Dan J December 8, 2011 at 10:38 pm

No blame on Janet Reno who threatened lenders with prosecution if they did not change some subjective stats showing no individual facts, but only created info meant to evoke emotion and push an agenda. No blame on liberal groups, like ACORN, Sic’ d on financial institutions to create a media scene. No blame on Barney Frank.

Martin Brock December 8, 2011 at 7:00 pm

Why would I buy real estate on the moon when I can pay far less for far more hospitable real estate in Antarctica or the Sahara? I liked Moon is a Marsh Mistress too, but for human habitation, valuable real estate will appear on the surface of the ocean long before it appears above the troposphere, and SpaceX can’t possibly change this fact.

Martin Brock December 8, 2011 at 7:01 pm

That’s addressed to cthorm.

Doc Merlin December 8, 2011 at 7:15 pm

The first big question is, “Is he better than the other republican candidates.”
I would answer a resounding “no.”

The second big question is, “Is he better than Barak Obama?”
I would answer that with an emphatic, “Hell yes.”

Justin P December 10, 2011 at 10:36 am

I agree.

Chucklehead December 8, 2011 at 7:19 pm

U.S. Foreclosure Rates October 2011
Nationwide: 1 in 563 (rate per housing unit)
1 in 1,049
1 in 455

1 in 9,889
1 in 4,352
1 in 2,988
1 in 1,031
1 in 12,570 1 in 694
1 in 4,892
1 in 1,525
1 in 1,794
1 in 2,969
1 in 458
1 in 894
1 in 1,930
1 in 905
1 in 845
1 in 1,127
1 in 2,862
District of
1 in 25,921
1 in 498
1 in 1,954
1 in 763
1 in 745
1 in 1,097
1 in 2,492
1 in 1,213
1 in 432
1 in 506
1 in 259
1 in 643
1 in 282
1 in 180
1 in 423
1 in 4,007
1 in 786
1 in 586
1 in 243
1 in 3,886
1 in 903
1 in 1,449
1 in 571 1 in 406
1 in 268
1 in 801
1 in 2,028
1 in 1,079
1 in 982
1 in 1,639
1 in 988
1 in 1,208
Sorry for the format

Dan J December 8, 2011 at 10:41 pm

Thanks. Can you derive any conclusions or theories from this info?

Chucklehead December 9, 2011 at 1:30 am

D.C. is bleeding the country dry. Foreclosures are 1 in 25,921 vs 1 in 180 in Nevada . National prosperity begins when the rats flee D.C.

Dan J December 9, 2011 at 1:42 am

Yeah…… Already on that train.

BillD December 8, 2011 at 7:54 pm
John T. Kennedy December 8, 2011 at 8:36 pm

“A GSE was quasi-private or quasi-public, take your pick. ”

Both really mean public.

indianajim December 8, 2011 at 8:37 pm

Newt frightens Pelosi her ilk, and THEY really frighten me (one hell of a lot more than he frightens me).

Denno December 8, 2011 at 8:40 pm

I am so glad to see this post because it echoes my thoughts. Thank you!

BTW, will IB ever learn the difference between corporatism and a free market? That’s why nobody takes his comments seriously.

Josh S December 8, 2011 at 10:29 pm

No. Learning the difference would threaten his prejudices, and that would make him upset.

Russ Fan December 8, 2011 at 8:42 pm

I can’t stand Gingrich either, Russ. But, your entire paragraph about his Mars comments stinks of this notion that something is not good if it’s not making people money. Going to the moon was not profitable, and many of the reasons for going weren’t very noble either, but it was still the greatest thing humanity has ever accomplished. Asking whether going to Mars is profitable gives credence to the idea of “one-dimensional man”, who never thinks of what might be, but just tries to make the best for himself within the confines of what is. In this case, it constitutes the triumph of dollar-worship over a sense of adventure or discovery.

Yergit_abrav December 8, 2011 at 9:00 pm

By what measure is going to the moon the greatest thing ever accomplished? What was given up in exchange for that achievement?

James N December 8, 2011 at 10:23 pm

And let’s not forget that the cost for going to the moon was borne by individuals that may not have shared your “sense of adventure”.

Dan J December 8, 2011 at 10:46 pm

It’s philosophical. Driving the sense of imagination and that, indeed, Man’s abilities may be limitless. Contributions to science. I cannot fully defend or criticize the origins of US space program. Don’t know enuf.

Josh S December 8, 2011 at 10:30 pm

No, the greatest thing that was ever accomplished was the publication of Wealth of Nations. Anywhere that even a small portion of its prescriptions are put into practice, starvation literally ceases.

That is pretty impressive if you ask me.

Sam Grove December 8, 2011 at 11:41 pm

Going to the moon was not profitable, and many of the reasons for going weren’t very noble either, but it was still the greatest thing humanity has ever accomplished.

How about the green revolution as humanity’s greatest accomplishment?

Many millions of people saved from starvation.

brotio December 9, 2011 at 2:36 am

I’m sure you know that to the regressives among us (paging Dr Muirduck!) saving millions from starvation has only added to the population explosion, so that can hardly be a great accomplishment.

Russ Fan December 9, 2011 at 10:42 am

Good point, Sam. That is certainly up there on the list (at least in my opinion). Nevertheless, space exploration is the next great endeavor for mankind, and going to the moon was the first step on that adventure.

stedebonnet December 9, 2011 at 1:10 am

I’ve often wondered about mineral extraction from space, while not viable right now, I think that as the world’s resources deplete (over a long period of time) we might turn to space “mining.” Then I think it could be profitable to society.

Russ Roberts December 9, 2011 at 6:59 am

I never said its lack of profitability was the problem. I said it was expensive. Not the same thing. Read my books. They emphasize the unimportance of money and the importance of other things that express our humanity.

jorod December 8, 2011 at 8:45 pm

Newt wants to be loved. That’s a red flag if there ever was one.

Greg Webb December 8, 2011 at 9:34 pm


JoshINHB December 9, 2011 at 1:25 am

Newt wants to be loved.


But Mitt needs to be loved. And that’s a lot worse.

Newt wants to be president to enact his reforms, many of which are crazy half baked ideas. That would be a lot more worrisome if he were to be elected dictator than president, since presidents have to deal with Congress and are hemmed in by law.

Mitt wants to be president to fulfill his familial destiny and vindicate his brainwashed daddy. He’s willing to make any statement and take any position that advances that end.

JoshINHB December 9, 2011 at 1:26 am

And that makes Mitt a lot scarier than Newt.

nailheadtom December 8, 2011 at 9:11 pm

If they’d have a put a strobe light up there, blinking on & off for a couple of weeks, to prove that they’d actually made it, then it would have been worth it. Now it’s mostly hearsay, lots of people don’t believe it ever happened.

Greg Webb December 8, 2011 at 9:27 pm

Excellent post, Russ!

What’s the matter? You guys don’t trust Newt? Why? He just wants the best for all Americans. Not! He is an applause seeking politician who wants to do well for himself and his cronies while telling everyone else what to do. Just like Obama and the other politicians and their cronies.

P. J. O’Rourke was exactly right when he said, “Giving money and power to politicians is like giving alcohol and car keys to teenagers”. It’s funny because it’s true. And, it’s true even if it’s the politician you believe is sincerely trying to do what’s best for all Americans. The solution is to reduce the power and money these idiots can obtain by seeking political office.

Jon Murphy December 8, 2011 at 9:30 pm

I’ve been wanting to say this for a little while:

Gordon Gekko: reptilian-named stock trader
Newt Gringrich: reptilian-named politician

Which one of these guys is fictional?

Jon Murphy December 8, 2011 at 9:31 pm

Both those should say “aptly reptilian-named…”

indianajim December 8, 2011 at 10:52 pm

Gekko sounds reptilian, Gingrich, not so much. Your spelling “Gringrich” IS fictional.

Jon Murphy December 9, 2011 at 12:31 pm

My bad. And I was actually refering to his first name “Newt.”

Bekah, a random reader December 12, 2011 at 3:54 am

Newts are actually amphibians (aquatic salamanders, to be precise). They’re cold, slimy, and will consume anything that will fit in their mouths. So yeah, aptly named.

Scott M December 8, 2011 at 10:13 pm

Another animal spirits, or government spirits – Local governments (here in Kansas especially), drunk on property tax dollars in the late 1990′s, raise the “appraised” tax value on homes. Many by 10% or more per year. This in turn raises the amount that commercial appraisers rate the home’s value. Rinse and repeat. My house value went up 219% between 1994 and 2007. And I certainly didn’t do that much to raise the value besides periodic maintenance. And, often, the local tax appraiser would only visit the neighborhood to do a visual tax appraisal once every three to five years. By decree they said that all houses in the NE section of town would go up X%.

Dan J December 8, 2011 at 10:51 pm

Ouch! That is disturbing. The insatiable appetite of elected officials to take and take….. Then allocate for applause of those who are the recipients of taken properties.

Scott M December 9, 2011 at 11:06 am

A family friend who lives a couple of miles away from me challenged the increase through the normal process, and was told that they (the State) would “compromise” by lowering it from 8% to 6%. Then she challenged it the next year and was told “you challenged it last year. This year it stands”.

Chucklehead December 9, 2011 at 1:24 am

Et tu, Brute?
Must we play Whac-A-Mole with every republican candidate?

SmoledMan December 9, 2011 at 2:00 am

What kind of a name is Newt Gingrich anyways?

Newt is some kind of primitive fish. Ging – wtf? Rich – self explanatory.

Dan J December 9, 2011 at 2:10 am

Barak Hussein Obama…… When he was born Barry. Hussein? Hhhmmmmm…. Remember another chap with the Hussein name.

Younger Cato December 9, 2011 at 2:43 am

A little bit? How bout a lot?

Ron Paul 2012

Anyone else would mean the end of the tea party.

rhhardin December 9, 2011 at 6:03 am

Anybody but Obama.

Younger Cato December 9, 2011 at 8:29 pm

That’s how we keep shredding whatever integrity is left in our constitution. Repubs = Dems. Wake up.

Dan J December 10, 2011 at 3:27 pm

Obama=communism ASAP
Repubs= slow increased GOVT toward socialism with two steps forward and one step back

Cari Beth December 10, 2011 at 9:26 pm


I think it actually is 2 steps forward to socialism and one step back. Republicans have done nothing to stop the exponential growth of government.

Sheldon Richman December 9, 2011 at 9:26 am

Russ, you write, “The important point is that Freddie and Fannie began to make increasingly risky loans, encouraged by their regulators.”

I thought the GSEs did not originate loans. Do you mean they bought increasingly risky loans from originators?

Younger Cato December 9, 2011 at 8:30 pm

Yes, that is their purpose, to create an artificial secondary market where one shouldn’t really exist given the riskiness of said loans.

SheetWise December 9, 2011 at 3:57 pm

Gingrich has always mused out loud — and I’m pretty sure that can be controlled, if not cured. It’s not really such a bad habit, if he can keep it behind closed doors. His hubris has subsided in recent years — at least publicly. He’s got a few bad habits. None of that scares me as much as the other apparent options — although, I do wish Chris Christie would change his mind … he’s much more measured in his approach.

kyle8 December 9, 2011 at 11:14 pm

Gingrich is a flawed, but truly transformational figure. You can lambast him all that you want, but the truth is that HE is the ONLY person in politics in the last 80 years who has actually caused the DECREASE in government in at least one area.

Remember it was he who was influential in creating welfare reform and in balancing the budget in the 1990′s. Who else can make such a claim?

Greg G December 10, 2011 at 7:59 am

“Who else can make such a claim?”


Greg Webb December 10, 2011 at 8:33 am

Swing and another miss. Clinton was merely a political opportunist. When he was losing soundly in the polls after the debacle of HilliaryCare, Bill jumped on the conservative bandwagon long enough to get re-elected. Bill also said that “the era of big government is over.”. He did not mean it. He just wanted to get re-elected by associating himself with the beliefs of the largest block of voters.

Greg G December 10, 2011 at 8:53 am

Sure he was an opportunist. No doubt. But he was an opportunist who who put the budget into surplus. You hated it when he opposed your ideas on welfare reform and you hated it when he embraced them. It’s enough to drive a politician to opportunism.

Justin P December 10, 2011 at 10:41 am

I always thought it was the House that originated all spending bills. Or does the Constitution lie?

Greg G December 10, 2011 at 10:51 am

The House does originate but either the House or the President can block a spending bill.

Justin P December 10, 2011 at 3:26 pm

So the balanced budget came from the House while Gingrich was the Speaker, or am I missing something?

Dan J December 10, 2011 at 3:30 pm

Balanced budget came from Gingrich and House……. Then thru Senate….. Then Exec. Branch approved and his veto could have been over turned

Greg Webb December 10, 2011 at 3:42 pm

That is exactly right, Dan J. Greg G is Just disingenuously trying to give Bill Clinton credit for something that he did not do nor would have supported had he the power at that time to defeat it.

Greg G December 10, 2011 at 3:56 pm

It’s true he did it for political reasons. A veto could not have been sustained at that time but he wanted to appeal more to independents.

So we agree the outcomes (welfare reform and a balanced budget) were a good result from politics.


Greg Webb December 11, 2011 at 2:22 am

Swing and another miss, Greg G! Politics resulted in a return to the old system of welfare under Obama. Under Speaker Gingrich, the House acted on principle and the Senate caved to the House as did Clinton who pretended to have something to do with it. It goes against politicians’ nature to act on principle, but Gingrich and the Republican House had backed themselves into a corner with the Contract with America.

Got yourself saying disingenuous things again!

Greg G December 11, 2011 at 7:00 am

I’m being disingenuous GW? We start here with a post at the Cafe on the loathsome behavior of Newt Gingrich. And we start with you pretending to be a libertarian who scorns politicians and the political process.

Then we wind up with me admitting that Clinton was an opportunist and you supporting k8 who is gushing about how “transformational” Gingrich is. You chime in with praise about how he “acted on principle.”

This kind of irony is why I love the Cafe. Look at how much money Gingrich has made off his political connections. He has taken that to a whole new level. “Transformational” is exactly the right word. You have revealed yourself to be a garden variety Republican.

Greg Webb December 11, 2011 at 3:20 pm

Greg G, Kyle8 clearly said, “Gingrich is a flawed. . . “ but you must have missed that in your rush to imply that I am not a libertarian because I, and Kyle8, correctly noted that Newt Gingrich was responsible for the balanced budget during the Clinton years and that Newt acted on principle on that issue because he could not face the likely election results if he did not keep his promises as stated in the Contract with America. How disingenuous of you!

It is fun irony that you accuse me of not being a libertarian just because I merely state the facts. According to your analysis, I will be a left wing Democrat if I state that Bill Clinton was right in proclaiming that “the era of big government is over.” LOL! Now, that would be irony!

Libertarians, if you have not noticed, seek the truth. You, Greg G, are merely a disingenuous troll. Though your silly attempts to mislead people lead me to believe that Methinks1776 may be right in saying that you are just stupid.

Cari Beth December 10, 2011 at 9:29 pm


The “Welfare Reform” that has been touted about really did not take people off of welfare. New programs were created at all levels, especially local to make up for this “reform.”

When taking this into consideration, MORE people ended up on welfare than before, it was just not all through the former means.

Greg Webb December 10, 2011 at 9:13 am

” . . . you hated it when he [Bill Clinton] embraced them [my ideas on welfare reform] . . .”

False. You have a bad habit of making things up.

“It’s enough to drive a politician to opportunism.”

No. Most politicians are insecure applause seekers who seek power to reward themselves and their political cronies by promising anything they have to to the voters in order to obtain that power.

vance armor December 12, 2011 at 4:52 am

Milton Friedman called Nixon “the most socialist president of the twentieth century.” If you liked Nixon, you’ll love Gingrich. Gingrich is the epitome of the “right-wing Progressive,” — he is demagogic, divisive, unprincipled, and began politics as a flunkie for Nelson Rockefeller. He believes in Empire and “American exceptionalism” in all of the wrong ways. Many “right-wing libertarians” — i.e. those who want to privatize the sidewalks but increase defense spending for Raytheon and Lockheed Martin — support Gingrich because “he balanced the budget” and “ended welfare” during the Clinton years. Nonsense. Gingrich was the power-mad poseur who defamed his way to the top of the House of Representatives and found himself in the position to play off the false “left-right” political paradigm for his own personal glory, until many of his Republican colleagues finally figured out that he is a man who cannot be trusted as dogcatcher. Note what Tom Coburn has said about Gingrich. Gingrich has all of the makings of an American Hitler/Stalin/Saddam Hussein. The FEMA camps are being staffed as we speak. President Gingrich will fill them to the brim. The Bush/Obama years will have provided him with the legal and administrative architecture for a tyranny far worse than that of even Woodrow Wilson. We are in George Orwell’s Nineteen Eighty-Four: Oceania, Eurasia, East Asia. Oceania — The USA/Progressive Empire; Eurasia — European Union/Fourth Reich; East Asia — The People’s Republic of China. Big Brother Gingrich will use Echolon, DARPA, and Global Positioning Satellites to spy on his enemies. Like Nixon, he will have a long Enemies List. Gingrich believes that GREAT PRESIDENTS are War Presidents, and the USA/Progressive Empire will have to wage a Great War under his stewardship, most probably against Islamic civilization in toto or the Chinese, or even both at the same time — and why not throw in the Russians for good measure? War, dictatorship, extreme tyranny, government-manufactured famine, a complete eradication of the Bill of Rights — welcome to Gingrich’s New World Order.

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