The American Spectator

adagioforstrings| 11.24.08 @ 12:03PM

In allocating the blame for the financial crisis between private versus public incompetence &/or malfeasance, does it have to be a binary either/or answer? Can't it be both? Admittedly, if both the public & private sector are to blame, the problem is much more deep rooted & difficult to address.

Mary| 11.24.08 @ 12:55PM

I wish you would write a piece on how free-market and capitalism differ, if they do.

I'm woefully ignorant as it pertains to the study of economics.

I only know these three things: if you watch your pennies, your dollars will take care of themselves. Whatever you subsidize you're going to get more of. To not pay back one's debts is immoral, and should cause you to be eaten away by shame so that you must hide your face and conceal your name from society. (I'm a very well-bred peasant!) ;)

But, it would be great to get some posts that educate. Tangentially, I scored an 88% on the Civics quiz that Mr. Lawler linked to. Public High School graduate - 1974. Congruent tangent (is that possible?) Why is it some kind of news that government run health care would just about kill conservatism? Talk about stating the obvious.

Please keep the government "out of my bedroom" but place it firmly between the doctor in the examining room and me?

Quo Vadis?

Bob| 11.24.08 @ 1:28PM

RSM, this shows you have little understanding concerning economics -- something I would expect from an admitted "anti-intellectual".

The underlying fundamental at the base of this problem was the belief that housing prices would continue to rise significantly over time. This implied that if one could not afford the mortgage they had, the home could be foreclosed and the lending institution would not lose much money. This false "truth" led to several events. Mortgages were securitized into highly rated tranches which started to occur in the early 80's. The rating agencies rated these high because of the original housing value belief. Then Congress, and specifically the Democrats, pushed down housing to those who could not afford it as the financial risk to lending institutions was believed to be low. Wall street, seeing highly rated securities that did not need much capital to back it up (because of the housing price base), sold these as high return, low risk securities. The rating agencies continued to rate them highly since housing prices continued to rise. Then, derivatives were created to leverage specific segments of these CDO's. The Fed surely backed this up with low interest rates. Specialized lending companies like Beneficial and Household then marketed sub-prime mortgages to low income, low information consumers on the basis of monthly mortgage payments and not future payments. Again, if housing prices held, this was not seen as a risk. Fannie and Freddie were not in sub-prime much but they did support 100 and 125 as well as ARM's. Since housing prices were seen as continually rising, people did not see the risk.

The fundamentals of markets and lending were forgotten and greed certainly played a role. But the big problem was that there was a housing bubble and it burst and since that house of cards had no capital to back it up, it fell apart in record time. In effect, it was a Ponzi scheme.

This is a simplified view, but to blame it on just the regulation or on greed is both wrong and too simplistic. The fact is that the right type of regulation is needed as long as it is measured and not overdone. There should have been capital requirements and the economists should have warned about bubbles. However, those on Wall Street were making good money and most highly paid economists worked on Wall Street.

What you should be talking about here, rather than anti-intellectualism and blame, is that true conservative principles could have helped. However, the Republican party was all caught up on social, rather than fiscal issues. This is, again, one of the reasons I continue to rail against social conservatives in favor of fiscal conservatives with an element of libertarianism.

Michael Roush| 11.24.08 @ 1:38PM

While it is true that Democrats pushed hard to make mortgage money available to those who previously did not qualify, one should review the tenants of President Bush's "ownership society" viz housing. We had a bi-partisan effort here. A simple web search of Phi Gramm's work in the House before he decamped for the private sector will certainly reinforce most people's belief that deregulation was a major contributor to the current financial meltdown. As for greed, one could argue that it replaced fiduciary responsibility in large segments of the banking sector.

Crusader| 11.24.08 @ 2:44PM

Bob, I didn't think you could work social cons into this answer, but it seems there is nary a problem that you CAN'T somehow blame on those evil social conservatives! Now we're getting blamed for people buying more house than they can afford? Wow.

The Republican party was caught up on social issues? Hmmmm. So did McCain suspend his campaign in mid-Sep to tackle the tough issues like abortion or gay marriage? Geez man exactly what planet are you living on? Better yet what is it you are smoking? Social issues were barely touched, if at all.

Bob| 11.24.08 @ 3:00PM

Crusader, I see you missed the point. Social conservatives limit who can be an elected Republican. Therefore, we end up with anti-intellectual candidates who wouldn't know good economics if it were written in the bible.

McCain would not have chosen that loser, Palin, if his campaign were not caught up on social issues. He would have chosen, Romney, Ridge, or even Lieberman (which was his first choice). So social issues did not have to be discussed because they were evident.

W. James Antle III| 11.24.08 @ 4:14PM

Get rid of social conservatives and you really limit who can be elected as a Republican -- to almost zero, at the national level. The party would be reduced to its Rockefellerite rump.

As a candidate, Romney talked more about social issues and targeted social conservatives more than McCain. And neither Ridge nor Lieberman are known for their economic expertise.

Bob| 11.24.08 @ 6:23PM

Antle, thanks for the thoughtful response, it is rare here. There is a difference between getting rid of social conservatives and letting them have veto power over the entire party. My problem is that your opinion that "We can't win without them" is making the Republican party whither away. We can agree that abortions should be reduced and decency is important to our society, but taking that position to the extreme is alienating independents. Extremes always alienate the center.

Regarding Romney, Ridge, and Lieberman, I agree with your statement. That's why I supported Romney. The fact that he was a social conservative did not bother me as his behavior in the past, especially as Governor of MA, was pragmatic. Like Reagan, he would not have forced his personal beliefs on the rest of us.

Jason Smee| 11.24.08 @ 9:48PM

All I have to say is the anti intellectual nature of some social conservatives is sickening and not only drives the party into the ground, but the country as well. The writers of the spectator show they firmly have no understanding of economics. This mess was created by a combination of a number of things including greed, ignorance, stupidity, corruption, regulation (both too much and too little) on the part of Wall Street, Mortgage Bankers, Rating Agencies, members of both political parties, foreign central banks and their respective governments, shareholders, and most importantly the American consumer, not merely one factor or another. While congress / Clinton / Bush might have enabled the start of subprime lending, it was the greed and ignorance of all parties involved that kept it going forward. The problem isn't only limited to the inner cities but extends to the mega church attending residents of the exurbs and other residents of "real america" that thought it was their constitutional right for the granite/stainless/plasmas/2 oversize suvs that are at the heart of this problem. America, we're in a real mess here, and thank god the idiots Palin/McCain didn't end up in the white house (unfortunately I voted for them). Neither one has the intellectual capacity to deal with this (nor do any of the contributors to this publication) mess (demonstrated by lack of discussion about economics at the RNC, poor math of Joe the Plumber, Palin's remark that it's not our fault someone convinced us to buy a house we couldn't afford, etc.....). Then again what would you expect from someone who graduated at the bottom of their class and a community college hopper.

Roy| 11.25.08 @ 4:21AM

I really have never quite understood how "greed" was supposed to lead to libertarianism.

We can squabble over whether the free economy, in which you keep the fruits of your labors, is better than the socialist economy, in which all wealth is put in a pot and distributed evenly by all wise bureaucrats.

What should not need to be squabbled over is that, based on sheer "greed" alone, the "me' economy beats the crap out of either. The way that works is that all the wealth in the economy is put into one big pot and distributed to me.

Of course - this is difficult to enforce, but if I can put together a special interest including me and some other group and convince everybody to pay us off - why not? based on "greed" anyway. Judging by the election results, a whole hell of a lot of Americans think this way.

The fact is that libertarianism is a moral principle, and sometimes one that requires a good deal of material sacrifice. I know libertarians don't like to think that, but it is true. You can justify the free economy as a particular case of the God-given right to freedom. You can justify it as the best thing for the community as a whole. What you can't do is justify it to every particular individual as his best choice, based on "greed".

As far as the leftoids blathering on about how they are oh-so "intellectual" - the emperor not only has no clothes, but he really needs to hit the gym.

Karl| 12.28.08 @ 1:56AM

How exciting, the death of capitalism. Who in the Kremlin said there was no God? There is a God, and when USA collapses into the cesspool it truly is, the world will celebrate the end of USA