DISQUS

Hanoch · 1 year ago

Handing anyone in government a "blank check" is a bad idea. However, if I were forced to take that gamble, I would put my money with republicans. After all, this mess came about because of the failure to rein in the GSEs, and that can be laid squarely at the feet of the democrats. As Charles Calomiris and Peter Wallison recently noted in the Wall Street Journal (http://online.wsj.com/article/SB122212948811465...), if the democrats had let republican-sponsored legislation in 2005 to come up for "a vote, the huge growth in the subprime and Alt-A loan portfolios of Fannie and Freddie could not have occurred, and the scale of the financial meltdown would have been substantially less." However, the democrats were big supporters of this reckless lending because it supported their "affordable housing mission".

Dan Colman · 1 year ago

Hanoch, That is a hard argument to make when you consider the very simple fact that the Republicans owned every branch of government during the making of the real estate bubble. But it's a nice try. And thanks for your contribution.

Dan

Hanoch · 1 year ago

Not a very persuasive point, Dan. Take a look at the judicial nomination process if you think it is easy for a slim majority in Congress to enforce its will over vigorous opposition.

The bottom line is that, long before the current mess, the most vocal criticism of the GSEs came from the right. I am no cheerleader for the republicans when it comes to fiscal responsibility. Unfortunately, however, when you look at the alternative, there really is no choice.

Matt Willhelm · 1 year ago

So the 2005 bill would have prevented Fannie and Freddie from keeping a portfolio, and in turn, a portfolio full of bad loans. This is admittedly a good idea. But wouldn't that just lead to other banks buying up the bad loans that would have ended up in the Fannie/Freddy portfolio? Wouldn't this problem still exist? Fanny and Freddie are essentially private companies now right? So how can you exclude them from holding porfolios? Maybe that was the Democrat's thinking?
Hanoch and Peter seem anxious to pin this on the democrats, but I agree with Dan, nice try. What about Phil Grahm, debt rating agencies, lack of auditing/regulating loan originators. This donkey has many tails.
Not to mention, weren't the Republicans the majority in 2005. How did the Democrats take this off the majority's table? Obama's been on Foreign Relations, Homeland Security, Health and Education committees, not finance committees, maybe it wasn't his place to be making finance laws?

Hanoch · 1 year ago

Matt, I am not "anxious to pin" the blame on the democrats. On this issue, however, it seems that, as between the democrats and republicans, the republicans generally had it right. It is thus odd to suggest--as the original post did--that the republicans are the less trustworthy party for implementing a bailout.

If you don't care for the WSJ article, here is one from IBD which also describes the genesis of this mess:

http://www.ibdeditorials.com/IBDArticles.aspx?i...