Newt Gingrich may not have lobbied on behalf of Freddie Mac (though they payed an awful lot for the services of an “historian”), but he did advocate the use of government-sponsored enterprises (GSEs) like Fannie and Freddie to encourage home ownership. VerumSerum has dug up a 2007 interview in which Gingrich defended Fannie and freddie and suggests that GSEs represented a successful approach to encouraging homeownership that conservatives should support.
I would love to see studies as to what house prices would theoretically be like now without Fannie, Freddie, Mortgage interest deduction or FHA 3% down loans. How high have we driven home prices in the attempt to make them 'affordable'?
Reply to this commentLinkReport AbuseNot possible. Not arguing with your premise, but it's based on a counter-factual, what would have happened if we hadn't done something, which by definition can't be quantified.
Reply to this commentLinkReport AbuseOur latest not-Romney reminds me surprisingly much of Romney.
Reply to this commentLinkReport AbuseNo politician that will be on the ticket is on record for saying GSE's are at risk for blowing up the economy.
The problem is that since politicians will say what people want to hear, what Gingrich said in 2007 or in 2011 on GSE's is more of the same. I'd give more weight to actions he took while in congress vs. his speechifying.
Best we can hope is that our nominee will read the tea leaves (pun intended) and advocate for good policy starting January 2013, with a more conservative congress taking leadership on the legislative agenda.
Reply to this commentLinkReport AbuseIf there's one thing conservatives believe, it's that liberals are unprincipled liars.
Here's your chance to abandon the moral high ground. You know you want to.
Reply to this commentLinkReport AbuseHave to disagree with you there, Mikey. Modern liberals are not unprincipled liars. They are highly principled.
It's just that their principles are bad. All of them.
Reply to this commentLinkReport AbuseHave to disagree with you there, Sarge. Read Rush's transcripts. Read your colleagues' comments on NRO. Etc.
Reply to this commentLinkReport AbuseThe concept and business model of the GSE's are a perfectly reasonable free-market approach to home financing. When they are run as a political operation they fall apart and endanger the entire economy.
With reasonable loan origination standards and clean securities ratings the GSE's would never have brough us to this sort of disaster.
Reply to this commentLinkReport AbuseAre you suggesting that loan origination standards and rating agency myopia caused the financial crisis?
If so, are you at least a little bit concerned about the private sector repeating the debacle?
Reply to this commentLinkReport AbuseI, for one, am not the least bit concerned about the private sector financial institutions doing anything that would not be in their own self-interest. Low (or non-existent) loan origination standards certainly qualify, and were not put in place as a result of a "good-idea fairy" floating around the corporate offices of the home loan companies. They were forced down their throats by the Federal government.
Reply to this commentLinkReport Abuse"Are you suggesting that loan origination standards and rating agency myopia caused the financial crisis?"
When airplanes crash, investigators usually conclude that it wasn't a singular cause for the crash, but rather a chain or sequence of events that ultimately led to ensuing catastrophe - and frequently, absent only one of the links in that chain or sequence, the plane very well may have not met its demise.
The same might said about the financial collapse of 2008. No, loan origination standards and the failure of the ratings agency didn't cause the crash by themselves. But, without both elements, it's possible and perhaps even likely, the financial "airplane" of 2008, wouldn't have fallen out of the sky.
In 2008, a LOT of things went wrong, and many factors contributed to why those things went wrong.
"If so, are you at least a little bit concerned about the private sector repeating the debacle?"
The only reason I'm concerned about the private sector repeating the same mistakes twice, is because they haven't learned from their mistakes. And, why didn't they learn from the mistake? Because they weren't allowed to fail. When you insulate someone from their consequences of their actions, they're going to keep commiting the same mistakes that led to those consequences (that they never felt).
Of course, it's not just banks that this applies to. In 1984, Ronald Reagan bailed out Chrysler. Big mistake. Rather than learning from the mistakes that were the root cause of Chrysler's problems (an unproductive workforce and higher-than-market-rate wages both as a result of government empowered unions) they continued the same-old, same-old business practices. So, 30-years later, Chrysler's history repeated itself, not surprisingly.
That history will repeat itself at GM too. It's just a function of human nature.
Reply to this commentLinkReport AbuseWrong...Chrysler "bailout", which was actually a bond guarantee, occurred in 1980. Carter, not Reagan.
Otherwise, your point about "too big to fail" translating into "failing to learn" is spot on.
Reply to this commentLinkReport AbuseChrisler was a private equity LBO. If you know how that works, you know why it failed.
Reply to this commentLinkReport Abuse"A lot of things went wrong" is totally at odds with conservative dogma, i.e., "It's all Freddie/Fannie's fault." I'll spare everyone the FCIC Report cite again.
Reply to this commentLinkReport AbuseThe dirty secret of the financial collapse is that...the loan origination standards weren't wrong.
Every year after about 1995, default rates and foreclosure rates for mortgages went down.
It is not reasonable to expect banks to look at a decade of declining default rates and conclude that their origination standards aren't sound.
In retrospect, it makes perfect sense that the low default rates of those years were a symptom of the growing bubble. But only in retrospect. In real time, reaching that conclusion would be difficult. And if any one bank did reach that conclusion and pulled back its underwriting standards in response, the thousands of other mortgage originators in existence at that time would have been only too happy to pick up their slack.
The "real" blame would go to whoever was responsible for the actions that produced the flawed bubble housing data that led the banks to conclude that their origination standards were sound. And I can't see anyone with more responsibility there than the Fed. Asset price bubbles of that magnitude can't happen unless the Fed screws up.
The Fed met several times a year from 2001 on and asked themselves, "Are we in an asset price bubble?" and every time their answer was "No."
Reply to this commentLinkReport AbuseSomewhere, Adam Smith weeps.
Do you appreciate the irony in describing something called a "government-sponsored enterprise" as a "free-market approach"?
Moreover, the only reason that Fannie/Freddie are GSEs rather than pure federal agencies is because it was becoming politically untenable to carry all that burden on the federal budget. So, in 1970 or '71, the geniuses in DC decided to move these programs off-budget by using this fallacious contraption known as a GSE. The reality is, of course, that the US taxpayer is just as responsible for the mess created by Fannie/Freddie when they've been a GSE as they were since they were part of HUD.
Now, people are free to argue the merits and benefits of taking federal money and inserting into the money supply that's available for home loans. But, to describe this concept as a "free-market approach", is patently absurd.
Reply to this commentLinkReport AbuseThe concept is not reasonable or free market. Nothing connected to the government can escape politics nor should it. If we want politics out of something, then it should be totally private. Because of the "government" part, Fannie and Freddie could assume all the risk real private entities wouldn't touch.
Reply to this commentLinkReport AbuseHey Adler. Ever thought about writing a post that is critical of Romney? You and Jennifer Rubin must be two of the worst Mittbottpundits out there.
Reply to this commentLinkReport AbuseUncledave is onto something here when he says "I'd give more weight to actions he took while in congress vs. his speechifying." Newt and his congress got some very big things right. Backed by a Paul Ryan, Marco Rubio and other young guns a lot of Newt's goofier ideas would be shot down quickly and some substantive corrections to our present path would be made. After the first of the year, we will be out of Iraq with that country possibly going to hell in a hand basket, highlighting Obama’s lousy foreign policy skills and judgment, again. Iran will be nearer (or have) a nuclear weapon. The parasitic OWS pack will be on the loose again. And Obama will be blaming Bush, ATM's, the Arab Spring, and global warming and ever more "moderates", independents and just plain folk are going to wonder what planet Obama comes from and as Governor Christie asked “Just what the hell are we paying you for?” All is not lost, and if Romney or Newt gets the nod, I remain optimistic.
Reply to this commentLinkReport AbuseNewt is nutty for government solutions to just about anything. Since he fancies himself the smartest in the room, he naturally believes he knows better than a free market.
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