Wednesday, July 25, 2018

2008: Who Really ‘Got Away With Murder?’

Back when Congress was formulating its partial roll-back of the financial regulatory bill nicknamed Dodd-Frank, the New Jersey Star-Ledger peddled the classic statist line (lie) about lack of regulation causing the 2008-10 economic crisis. Wrote the Star-Ledger in Wall St. bankers 'got away with murder.' Now GOP wants to reward them,

The so-called "Financial Choice Act," co-sponsored by Rep. Tom MacArthur (R-3rd Dist.), not only pretends Wall Street's naked swindle never occurred, it feeds a deregulation bonfire that could allow the banking industry to explode in another fireball of freedom.

“Fireball of freedom.” That’s the way the statist Left views private individuals exercising their right to act on their own judgement. Need I say more? I did, in these comments:

This is a bigoted, racist-like broad swipe against “Wall Street.” Not a word about the people who control the unfree lending market, government officials. Statist apologists will apparently never stop lying about the genesis of the 2008 financial meltdown.

The Dodd-Frank law was sold on an outright lie, a complete and deliberate misidentification of the causes of the 2008 catastrophe. The banking industry consists of a diverse universe of thousands of lenders. In a free market, the mistakes of one bank won’t affect other banks. Those that make bad loans pay the price. Those with sound lending standards reap the rewards.

How is it, then, that an entire lending sector, the gargantuan home mortgage industry, can all be oriented in the same direction—the direction of sub-prime mortgage lending? The only institution capable of infecting the entire banking and financial system with bad lending is the federal government, through it massive regulatory labyrinth. Government regulation is the common thread. And that’s exactly what happened. It started in the 1990s. The housing boom and bust, financial meltdown, and Great Recession were engineered from the Washington political establishment—a perfect storm of government intervention.

From the Fed to the FDIC, CRA, Fannie & Freddie and the implied federal mortgage guarantees, the legally protected rating agency cartel, FHA, SEC, FASB accounting regulations, and on and on, the massive federal regulatory apparatus was geared to enforce the politicians’ bipartisan affordable housing crusade. There is no way some mythical Great and Powerful Oz labeled “Wall Street” could have done this. Bad lending by Wall Street “swindlers,” which in fact were very few in number, would have quickly evaporated but for the Clinton/Bush mandates for Fannie and Freddie to buy up the bad mortgages and the regulatory pressure to lower lending standards, all built upon the Fed-engineered mother-of-all housing price bubbles. Whatever financial firms acted badly—and many did, such as Angelo Mozilo’s Countrywide and IndyMac Bank—private sector culpability was a derivative effect, not a primary cause. It was not any “fireball of freedom” that unleashed the sub-prime disease. What freedom existed in finance? The culprits were the little men behind the curtain—the tools of the political class’s affordable housing swindlers, the wizards holding the levers of control over the financial industry.

The primary causes of the meltdown were government initiated, and have been well documented in books published by experts such as Thomas Sowell, John A. Allison, and Peter J. Wallison. Many articles have been written outlining the true nature and causes of the economic destruction, including “Free Markets Didn’t Create the Great Recession” by Don Watkins. But the statists refuse to acknowledge their own primary culpability, and instead opted to shield themselves from blame, protect their own power, and expand their control over the economy—with the help of “progressive” hacks in the media such as the statist editorialists of the Star-Ledger.

We don’t need more protection from Wall Street and financial institutions. We need protection from our “protectors”—and to hold the real political culprits accountable, starting with Barney Frank, Chris Dodd, Alan Greenspan, Ben Bernanke, Franklin Raines, Bill Clinton, and George W. Bush. We need to ignore “fake news” editorials like this one, and go back to the proverbial drawing boards. Repeal Dodd-Frank. Get honest with Americans. And then enact, revise, or repeal laws that will actually prevent such politically engineered crises from ever happening again, while retaining long-standing fraud protections but otherwise liberating the financial business to do its job of providing capital, savings and investment opportunities, and consumer financing for entrepreneurs and so-called “working families”—i.e., productive people—alike.


Related Reading:

Finally, Some Positive Recognition for the Statists' Favorite Whipping Boy, Wall Street

The Nature and the Origin of the Subprime Mortgage Crisis—San José State University
Department of Economics

The subprime mortgage crisis had its origin in the program the directors of Fannie Mae initiated in the late 1990's to pursue social welfare goals rather than maintain financial viability.

Altruism: The Moral Root of the Financial Crisis—Richard M. Salsman for The Objective Standard, Vol. 4. No. 1.

Why No Wall Street Prosecutions? The Villains Are All In Washington

No comments: