Blame for the Mortgage Mess

The Punch and Judy show being put on at the senate by executives from Goldman Sachs and various grandstanding politicians reminds one once again how much silliness, special pleading, and outright misrepresentation there has been in attempts to fix blame for the financial crisis. Leftists claim that a laissez faire (!) Bush administration allowed it to happen through insufficient regulation but cannot point to any significant regulation from former times that Bush had repealed or to any regulations that his administration failed to enforce or even to any new regulations that would have prevented it if they had been in force. One is left to suspect that all we are really seeing is their familiar cry that something has gone wrong in the world and they need more power to see that it never happens again.

Conservatives such as Rush Limbaugh and Sean Hannity fix the blame on Democrats for imposing de facto quotas for lending to members of favored racial groups, for generally driving lower underwriting standards in the mortgage industry, and for protecting the corrupt and irresponsible Fannie Mae and Freddie Mac, placing particular blame on Barney Frank and Chris Dodd. In the case of Frank, this is just silly. There is no filibuster in the House but rather simple majority rule. From 1995 until January 2007 the Republicans had a majority in the House, and neither Frank nor any other Democrat could have stopped them from fixing anything they thought needed fixing in the mortgage business. It is difficult to blame the Dems exclusively for a crisis that came to a head after four years during which the Republicans controlled both houses of congress and the presidency.

It is particularly unfortunate that some conservatives feel a need to defend the people on Wall Street who through enormous incompetence and occasional crookedness created much of the problem. It shows that they have failed to grasp an important principle. We defend freedom, not because it produces the best outcome every time, but because it is right that people should be free. Most people can see this with freedom of speech. We defend it even though it allows for the expression of the most vile, inane, and harmful opinions. The same is true with economic freedom. We defend it because people are free to live their lives and make their own decisions, not because we believe all those decision will be the right ones. (Certainly it is true that in the big picture and the long run, free economies produce far better results and far higher standards of living than do un-free ones. However, that is a benefit of respecting human rights, not the prime reason for doing so.)

People can screw up. Irresponsible borrowers can take on debt they cannot service. Lenders and investors can decide that credit worthiness does not matter in times of inflating prices of collateral. Insurers can take on too much risk. Credit rating analysts can forget that a diversified pool of junk is still junk. Wall Street players can tie themselves into knots of hedges and counter-hedges. Fools can decide that, since nothing has gone wrong for a while, nothing will ever go wrong. When they do, one should face the facts and blame them for it, while still defending their economic freedom, just as one should oppose the expressed opinions of a ranting fanatic while still defending his freedom of speech. There is a real need to defend economic (and every other sort of) freedom. There is no need to excuse the actions of incompetents and scoundrels.

As to the pragmatic specifics of reform, I think the real reform we need now is to define a very clear line between what is guaranteed by the taxpayers (such as the deposits of commercial banks) and what is not and to make it clear that that line will never again be crossed. Those organizations that have their liabilities guaranteed by taxpayers should have careful oversight from the government, acting as the taxpayers’ agent, to make sure they behave prudently. Those that do not should be free to go their own way, gambling – if they choose to do so – only with their own money. They and their customers should understand that there will be no more bailouts for them.

Celebrate Earth Day. Burn a Tire.

Today is earth day, surely a phony holiday if ever there was one – phony in the same sense that Kwanza is phony, created for a one purpose, claiming to serve another, and foisted on the public by an adoring media. Its ostensible purpose is to promote the laudable goal of conservation. Its actual purpose is to promote left wing politics and expanding government control over people’s lives.

However, perhaps one should not be too cynical about it. After all, every other religion gets its holidays , so why not this one? That eco-worship is a religion should by now be so obvious as to not be particularly controversial. Indeed it provides the same sort of ready and familiar replacement for traditional religion that overt Marxism did for the disillusioned of earlier generations. It offers similar spiritual satisfaction and a similar mythology. It posits a former ideal state of harmony and grace, a fall from that state brought about by humanity’s sins and disobedience, a chance for redemption through renunciation and obedience, a certainty based on unshakable faith, Manichean contempt for the non-believer, a looming apocalypse, and, most important of all, opportunity for an easy sense of virtue and cosmic righteousness based solely on holding the correct opinions. No wonder it is so popular.

It is also quite dangerous, because it is a crusading faith, resembling the Islam of the early caliphate more than the tired and emptily ritualistic Church of England of the present century. It is a mass movement, not as large a one as its cheerleaders in the traditional media would have one believe, but a mass movement nonetheless. Such mass movements of humorless, self-righteous fanatics rarely end well and should be view suspiciously by sensible people, irrespective of their goals. After all, you can’t make an omelet or save the planet without breaking a few eggs. One wouldn’t want himself or his property or his children’s future to be one of those eggs.

So all the heretics should be as heretical as possible on this the holiest holiday of the eco faith. For myself, I’d celebrate the day by burning a tire in the front yard, if I had one and if it wouldn’t smell so bad and if it weren’t illegal in my town. So instead I suggest a healthy horselaugh at the expense of the faithful and a renewed commitment not to be railroaded by them.

Tall Tales

The spurious folk legends and tall tales that grow up around a famous American often can tell us something real and valid about that person. That is because such yarns usually have and gain their popularity and plausibility from a connection with the person’s actual character and deeds. The stories that stick and spread tend to fit the person they are told about to some degree and to reflect something true about him, false though they may be. Thus the folklore is full of tales of the bold, daring, pathfinding, larger than life deeds of Daniel Boone, Kit Carson, and Davy Crocket, while there are no similar legends about, say, John Quincy Adams. That is because Boone, Carson, and Crockett really were the sort of men the exaggerated yarns make them out to be. Similarly there are all sorts of myths about the wisdom and good character of Benjamin Franklin, Abraham Lincoln, and George Washington but not about Aaron Burr or Franklin Pierce.

That is as true today as it was in the earlier days of the republic. Many of the silly yarns about Bill Clinton had to do with shifty deals, crooked politics, picaresque sexual exploits, and general slick business. We had such stories bouncing all over the country about Clinton (and not about such duller characters as Mondale or Dole) partly because he really was a slick operator with a yen for the bimbos and an eye for the main chance. (This doesn’t mean that he was a bad president. I think he was well above the recent average.)

With that in mind, it is interesting to look at the whoppers and tall tales circulating the internet about Barack Obama. We have the story that he is not really an American citizen, the story that he is secretly a Muslim, the story that he was born in Kenya, the story that his real father was an American communist named Davis, the story that as a boy he attended a madrassa run by Wahabis, the story that he refuses to say the pledge of allegiance, the story that he is secretly a tool of the Chicago mob, the story that he attended a California college as a foreign student from Indonesia, and all the various claims that he is somebody’s Manchurian Candidate. The recurring theme is obvious. It is a sense that he is in some deep way not what he claims to be and a feeling that he is at some level anti-American. It is interesting to consider whether here again, despite the outrageous falseness of many of the stories themselves, the folklore contains some folk wisdom.

Almost all politicians wear masks from time to time, but this president seems to do so more than most. And while he may not be anti-American by conscious conviction, he often gives the impression of being so by emotional inclination, particularly in unscripted moments.

A Grim Anniversary

Seventy years is a long time, three generations, long enough to erase a lot from the popular consciousness. So I doubt there will be much notice given to the coming seventieth anniversary of the most disastrous single event of the 20th Century, the fall of France in the late spring of 1940. The Great War of 1914-1918 was more consequential, making possible and leading to much of the decline, horror, and disaster that followed including the calamities of 1940, but it was not a single event. It took four gruesome years to have its full effect. The collapse of France in 1940 took just six weeks.

Even after the Great War, there had been a hope and perhaps even a possibility that things in Europe could return to something like normal. Superficially the world of 1925 was in many ways not so different from the world of 1910. Europe remained the world’s center of science, art, and scholarship. The British Empire was intact with all its overseas possessions. So were the French, Dutch, and all the others except the German. The Royal Navy continued to rule the seas. Outside Russia, there had been few deep changes to the social order. London and Paris still enjoyed their preeminent positions. World civilization was seen mainly as European civilization as was world power.

The fall of France changed all that. Coupled with the character of the Nazis, it guaranteed that however the war might end, post-war Europe would be something very different from even the 1930’s. Those six weeks were a turning point in world history.

Afterward came the Battle of Britain, Lend Lease and the arming of the United States, the war between Germany and the Soviet Union, Pearl Harbor and America’s entry into the war, the Nazis’ horrific crimes, the Soviets’ conquest and enslavement of Central Europe, the rise of the United States as a world power, the dissolution of the British, Dutch, and French empires, the Cold War, and the Europe we know today.

We can conjecture what might have happened if France had not fallen - if its army had held out as it did in 1914. It is probable that Italy would had stayed cautiously neutral, resulting in no war in Africa or the Mediterranean. Since Japan might have been reluctant to take on both the United States and the intact British and French empires in the Pacific, the United States might never have entered the war and might not have become the power it is today. The Nazis and the Soviets might never have fought. The Nazi government, if defeated or stalemated in France, might even have fallen before it could commit its worst crimes. Or something much worse than the actual events could have happened, such as the war in France dragging on until an unconquered Nazi Germany got the atom bomb first.

We can never know,but we can see what those six weeks in the spring of 1940 caused and in what terrible danger they placed civilization. We can also see our rather minor problems in better perspective by making a comparison to the world situation during the awful summer and fall of 1940. The Nazis with the world’s strongest army were the masters of continental Europe. Imperial Japan with the world’s strongest navy was their formal ally. The Soviet Union with the world’s second strongest army was their partner and de facto ally. Only Britain with a poorly armed and defeated army remained against them. That really was a crisis of civilization.