...government isn’t fundamentally in the Last Judgment business, making sure everybody serves penance for their sins. In times like these, government is fundamentally in the business of stabilizing the economic system as a whole.Basically I've heard numerous conservatives say on the teevee, especially during the "debate" on the stimulus plan, that until housing in America stabilizes, we can't fix the fundamentals of our economy, as the financial markets will still have too much uncertainty in pricing these mortgage-backed securities. However, I'm now hearing so much ire from conservatives about Obama's plan to fix housing that I'd love to hear what they actually want him to do. Basically, they seem to be fixated only on opposing anything he does, rather than proposing serious solutions for the ills to our economy.
Let me put it this way: Psychologists have a saying that when a couple comes in for marriage therapy, there are three patients in the room — the husband, the wife and the marriage itself. The marriage is the living history of all the things that have happened between husband and wife. Once the patterns are set, the marriage itself begins to shape their individual behavior. Though it exists in the space between them, it has an influence all its own.
In the same way, an economy has an economic culture. Out of billions of individual decisions, a common economic landscape emerges, which frames and influences the decisions everybody makes.
Right now, the economic landscape looks like that movie of the swaying Tacoma Narrows Bridge you might have seen in a high school science class. It started swinging in small ways and then the oscillations built on one another until the whole thing was freakishly alive and the pavement looked like liquid.
A few years ago, the global economic culture began swaying. The government enabled people to buy homes they couldn’t afford. The Fed provided easy money. The Chinese sloshed in oceans of capital. The giddy upward sway produced a crushing ride down.
These oscillations are the real moral hazard. Individual responsibility doesn’t mean much in an economy like this one. We all know people who have been laid off through no fault of their own. The responsible have been punished along with the profligate.
It makes sense for the government to intervene to try to reduce the oscillation. It makes sense for government to try to restore some communal order. And the sad reality is that in these circumstances government has to spend money on precisely those sectors that have been swinging most wildly — housing, finance, etc. It has to help stabilize people who have been idiots.
When the shit hit the fan a few months ago in the economy, I put up a couple of posts commenting on the causes of the mortgage meltdown and the role that lawmakers played in fostering it. I largely relied on excellent journalistic work by Mother Jones and Steve Benen in pointing to the facts about how many high-risk loans involved non-bank mortgage companies, none of which are regulated by CRA, and singled out Phil Gramm for his efforts to deregulate mortgage-backed securities exchanges and credit-default swaps. I also quoted two noted economists in their analysis of what led up to the financial crisis in our country.
Now Gramm's on the offense, which pisses me off mightily.
I just read a piece by Benen pointing out that conservatives still want to blame the poor for the financial crisis, rather than those who changed the laws around lending and securities exchanges, just as they did a few months ago. Apparently conservatives haven't gotten the message about Gramm. Maybe this article at Time ranking Phil Gramm at #2 (after Countrywide founder Mozile) in the 25 people to blame, or this technical article at the Wonk Room will help them come to their senses...
...ok that was a joke.
