Political Hay

Jurassic Government

Barack Obama meets the Malcolm Effect.

By 11.14.13

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“You're going to engineer a bunch of prehistoric animals and set them on an island. Fine. A lovely dream. Charming. But it won't go as planned.”
Mathematician Dr. Ian Malcolm in Michael Crichton’s Jurassic Park

Call it Jurassic Government. The place where the dinosaurs of centralization, supposedly under tight control, break loose, roam freely — and breed. The place where Barack Obama stars as rich, eccentric dinosaur enthusiast John Hammond.

Recall Jurassic Park, that Michael Crichton novel of several years back, made into a 1993 Hollywood blockbuster by Steven Spielberg. Jurassic Park being an island off of Costa Rica where the wealthy dinosaur-loving John Hammond had used a clever technique for recovering dinosaur DNA from insects trapped in dinosaur-era amber— and proceeded to clone the once extinct dinosaur in all its ancient variations. With terrifying scenes like these from the movie in which a Tyrannosaurus Rex — T. Rex for short — upended a tourist rail car while velociraptors leapt after their prey with a frightening speed.

The central premise of both book and movie (there were the inevitable sequels) was that man’s arrogance inevitably led to Trouble. That’s Trouble with a T which rhymes with a D which stands for dinosaurs. (Apologies to The Music Man.)

John Hammond, you see, with money to blow and obsessed with his love of the dinosaur, brought his favorite species back to life based on his certainty that he could in fact control Jurassic Park once filled with cloned dinos. There were pens and electric fences, and by cloning only females there was no chance, but of course, that these potentially troublesome creatures could actually breed and, well, you know….get out. Also known as scaring the living bejeebers out of people shortly…very shortly…before eating them alive.

No siree. Could never, ever happen. John Hammond had hired all manner of smart people who knew what they were doing. As illustrated in this bit of dialogue from the novel between the skeptical mathematician Dr. Ian Malcolm and a Hammond smarty named Dr. Wu. The topic is the number of Procompsognathus or, as they are short handed, “compys.” Creatures who, in the story, possess a venomous chomp-down that is a sleep-inducing tranquilizer. Malcolm, alarmed, realizes these little buggers could be dangerous. So he has this back and forth with the smarty-pants and arrogant Dr. Wu:

Malcolm: How many compys did you make?

Wu: I’ve forgotten exactly, but I think the target population was fifty animals….

Malcolm: Fifty animals is a lot to keep track of.

Wu: The control room is built to do exactly that. They’ll show you how it’s done.

Malcolm: I’m sure. But if one of these compys were to escape from the island, to get away….

Wu: They can’t get away.

Of course, Wu, his arrogant colleagues and most especially their boss John Hammond are wrong. All the dinos — plenty of them in fifteen different flavors — not only breed (with the unexpected assistance of frog DNA) — they do “get away.” And there is hell to pay for man’s arrogance.

Crichton presents the problem as part of the “Malcolm Effect,” his character Dr. Malcolm’s belief that even the smallest changes in complex systems set in motion an entirely new set of circumstances that can’t be foreseen — much less controlled.

Obamacare is nothing if not an example of the Malcolm Effect. Jurassic Park was John Hammond’s version of utopia — an island paradise of dinosaurs under the complete control of man. To which Dr. Malcolm replied, bold print for emphasis:

“You're going to engineer a bunch of prehistoric animals and set them on an island. Fine. A lovely dream. Charming. But it won't go as planned.”

It might easily be said to President Obama in Malcolmesque fashion— and indeed in one form or another it has been said:

“You're going to engineer a massive government takeover of one sixth of the American economy, promising Americans they can keep their health insurance and their doctors if they like them. Fine. A lovely dream. Charming. But it won't go as planned.”

Obviously it has not.

The T. Rex of Jurassic Government has become Obamacare. Spending decades patiently stalking the American health care system, then, at President Hammond…ah…sorry…President Obama’s direction with the aid of Speaker and Senator Wu…ah…Pelosi and Reid….closing the gap in a matter of months. Wounding its prey and dragging it forcibly online to a jungle that is at once difficult to enter and impossible to leave.

The swiftly moving raptor? That would be the government-induced financial crisis of 2008, the cold-eyed government raptors moving with shocking speed to foreclose on millions of Americans, relentlessly savaging mortgage lending standards to satisfy the progressive hunger for another raw chunk of utopia.

You can’t make it up.

One government policy wreaks havoc with the American housing credit system.

Now another comes along that savages the American health care system.

Both disasters spring from the Jurassic-era idea of a massive, centralized bureaucratic government, a vestige of the 20th century that is, in the 21st century of computers and high technology, a dinosaur. A relic of an era long gone by, run by a collection of Dr. Wu’s at the direction of a President Hammond, the latter adamantly refusing to acknowledge that most basic of human lessons: principles never change and change is not only eternal it is always going to create unpredicted consequences.

Put another way? When governments get into the business of social engineering, failure is only a matter of time. The dinosaurs will get out — and they will breed.

As Obamacare continues to unravel, little attention is being paid to the fact that this is the second major government-caused disaster in five years.

The first, appearing in September of 2008, came close to collapsing the American financial system and sent the housing market plummeting through the floor. Resulting in all manner of Americans losing their homes — a direct result of three government dinosaurs: Fannie Mae, Freddie Mac and the Community Reinvestment Act of 1977. Under the direction of the Clinton administration’s dinosaur, the 1994 National Homeownership Strategy, standards were relaxed for low-income borrowers.

Professor Stan Liebowitz, the Ashbel Smith professor of economics at the Business School at the University of Texas at Dallas, wrote about the government’s culpability back on September 24, 2008, in the New York Post (bold print added for emphasis):

How did America wind up in its worst financial crisis in decades? Sen. Barack Obama explained it this way last week: ‘When sub-prime-mortgage lending took a reckless and unsustainable turn, a patchwork of regulators systematically and deliberately eliminated the regulations protecting the American people.’

That’s exactly backward. Mortgage lending took that “reckless and unsustainable turn” because of regulation — regulation driven by liberals and progressives, not free-market “deregulators.”

Pushed hard by politicians and community activists, the regulators systematically and deliberately altered financially sound lending practices.

The mortgage market was humming along just fine when, in the late 1980s, progressives decided that it needed to be “fixed.” Their complaint: Some ethnic groups got approved for mortgages at lower rates than others.

In reality, mortgage lenders were simply being prudent — taking care to provide mortgages to those who could best afford to make the payments.

Liebowitz goes on to discuss the extensive injection of government into the mortgage market by progressives — an injection that resulted in the historic collapse in September of 2008.

While Liebowitz doesn’t phrase it this way, what he was describing was the Malcolm Effect at work. 

The mortgage market, “humming along just fine,” suddenly had to contend with “fixes.” The idea that because some “ethnic groups got approved for mortgages at lower rates than others,” in Liebowitz’s words, became an obsession for the always racially oriented Left. The “skincolor liberals” as we call them here — the political heirs of skincolor judging as a societal must and political necessity from slavery to segregation to lynching, the Klan, racial quotas, and skincolor-based illegal immigration — demanded race be injected by the government into the mortgage market. The government dinosaurs were loosed in the form of the Community Reinvestment Act, the mandated collection of racial data for mortgage applicants in the 1989 Home Mortgage Disclosure Act, a study by the Boston branch of the Federal Reserve followed by new requirements for banks.

Writes Liebowitz of this particular bunch of government dinosaurs roaming the land of the American financial system, terrorizing mortgage lenders:

Soon, these loans began to be sold in the secondarymarket. Fannie Mae and Freddie Mac were enthusiastic proponents of relaxed lending standards and purchased large swaths of these loans.

Time after time, Fannie and Freddie trumped criticism by pointing to how they were helping broaden homeownership. Because of the subject’s racial overtones, they beat back calls for reform even after financial irregularities were found.

Rating agencies such as Standard & Poor’s had no experience with such loans — and imprudently used the misleading bubble-induced performance to incorrectly judge the likely performance of financial instruments based on such loans.

In 2002, the “reformers” declared victory. In a Fannie report, four academic supporters of relaxed standards crowed how these changes were “fundamentally altering the terms upon which mortgage credit had been offered in the United States from the 1960s through the 1980s.… These changes in lending herald what we refer to as mortgage innovation.”

An epidemic of government dinosaurs so ravaged the mortgage landscape that foreclosures swept the nation. Like this one in Washington State as reported by a local business journal:

The Binfets probably should have never received their mortgage.

When they signed the papers in 2004, they had only recently emerged from Chapter 7 bankruptcy. It was the family’s second bankruptcy filing.

Still, the Binfets, who had been renting, didn’t have to look hard to find a mortgage.

Pierce Commercial Bank was their first stop.

The small Tacoma bank, founded in 1997, has only one branch and a tiny office where it originates loans in Puyallup. Back in 2004, Pierce Commercial was in the business of making subprime loans to borrowers with shaky credit scores.

It would underwrite the loan and then quickly sell it to investors, said Gary Gahan, president and chief executive of the bank. Its loan standards were set by what the investors wanted.

“We would underwrite to what the investors would expect,” Gahan said. “Back then there were an awful lot of loose standards made available by investors: ‘This is what we’ll buy today — credit scores of X and bankruptcies are fine.’”

Each loan sale typically made the bank several thousand dollars and riskier loans tended to make more money, he said. But sensing the bubble, Pierce Commercial got out of the subprime loan business two years ago, just as the market for risky loans dried up. The bank currently has assets of $274.5 million and churns out between $25 million and $35 million worth of mortgage loans each month.

The Binfets were given a loan with a rate of 8 percent that only required them to pay the interest initially. They don’t remember if they put money down. If they did, it was minimal, Charlene Binfet said.

“Welcome to loosey-goosey lending,” said Jeff Bell, a mortgage planner with Kirkland-based Cobalt Mortgage. “In 2004, if you could breathe you could get a mortgage.”

They bought their house for $255,000 — worth $260,000 at the time, according to Zillow.com.

Even though they knew their credit scores weren’t good, they had no idea they were receiving a subprime loan.

“If anything was said to us, it was unclear,” said Charlene Binfet.

That’s not surprising to Mike Gamsky, a securities lawyer with Seattle-based law firm Foster .

“If you were dealing with a mortgage broker, they would often just say, ‘Here’s the best deal I can get you,’” he said.

Notice the comment from the mortgage planner? This one?

“Welcome to loosey-goosey lending. In 2004, if you could breathe you could get a mortgage.”

 Loosey-goosey lending is what the local mortgage planner called it. And that loosey-goosey lending, as Liebowitz says, caused:

that “reckless and unsustainable turn” because of regulation — regulation driven by liberals and progressives, not free-market “deregulators.”

Pushed hard by politicians and community activists, the regulators systematically and deliberately altered financially sound lending practices.

In other words, in the world of Jurassic Government, liberals, progressives, politicians and community activists opened the electric fences and out hopped the loosey-goosey mortgage lending raptors, swiftly tearing at the vitals of the American financial system. Raptors bearing names like the U.S. Department of Housing and Urban Development, the 1994 National Homeownership Strategy (published, wrote Peter Wallison here at The American Spectator back in 2009, “at the request of President Clinton”), Fannie Mae, Freddie Mac, the Federal Reserve and, but of course, the U.S. Congress.

As a direct result of all those government dinosaurs rampaging through the mortgage landscape the U.S. economy crashed in the same fashion John Hammond’s fantasy of Jurassic Park crashed. The Malcolm Effect had taken hold.

Next, not satisfied with their disastrous government meddling in housing — liberals moved on to let their government dinosaurs loose in the American health care system.

Result? Millions are losing their health insurance.

Switch topics from government raptors sinking their claws into the world of housing to government intervention in health care and one finds this story of more government dinosaurs at work, savaging not mortgages but health insurance. The T. Rex was written up in this now-famous Wall Street Journal story by Edie Littlefield Sundby that bore the title:

You Also Can't Keep Your Doctor
I had great cancer doctors and health insurance. My plan was cancelled. Now I worry how long I'll live.

Ms. Sundby, a Stage Four cancer patient (gall bladder cancer) has just watched a government T. Rex grab hold of her access to “great cancer doctors and health insurance” — and kill it.

She has put on a very brave face in discussing all this in public, but one cannot doubt that in fact Ms. Sundby is understandably as terrified for real as were those fictional passengers of that tourist rail car in Jurassic Park. As they suddenly saw a T. Rex looming over their car, looking in the windows, then bellowing in ear-splitting fashion as it proceeds to topple the car on its side and trample it in an attempt to get at the terrified people inside.

Sundby’s article — a plain example of the Malcolm Effect — was so vivid that it drew an attack from the White House, as described here in the Journal:

Dan Pfeiffer, President Obama's chief political spinner, sent out a now infamous tweet on Monday linking to a left-wing website that blamed Mrs. Sundby's policy loss on UnitedHealthcare. The White House default is always to blame the insurers.

This White House attack is precisely described in Jurassic Park as Hammond and company, watching their creation of a dino paradise slowly, then rapidly and dramatically fall apart — blame all manner of people or unforeseen circumstances for their plight.

In effect, what Edie Sundby — and now millions of Americans who are losing their health insurance every single day are learning — is the inevitability of the Malcolm Effect on the dinosaur that is government control.

Again, the wisdom of Dr. Malcolm — the late Michael Crichton:

“You're going to engineer a bunch of prehistoric animals and set them on an island. Fine. A lovely dream. Charming. But it won't go as planned.”

Ronald Reagan described the Malcolm Effect years before Michael Crichton wrote it up, years before the crash of the American financial system in 2008 and Obamacare’s crash this minute.

Reagan’s version of the Malcolm Effect — and all those government dinosaurs that were already loose in the land in January of 1981 — was, famously, this:

“In this present crisis, government is not the solution to our problem; government is the problem.”

Reagan — and Dr. Malcolm — had it exactly right.

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About the Author
Jeffrey Lord is a former Reagan White House political director and author. He writes from Pennsylvania at jlpa1@aol.com.