Free Markets, Free People
And big media collusion. Dana Loesch has the story.
Big Journalism has learned that the Occupy Washington DC movement is working with well-known media members to craft its demands and messaging while these media members report on the movement. Someone has made the emails from the Occupy D.C. email distro public and searchable. The names in the list are a veritable who’s who in media.
Journolist 2.0 includes well known names such as MSNBC’s Dylan Ratigan, Rolling Stone’s Matt Tiabbi who both are actively participating; involvement from other listers such as Bill Moyers and Glenn Greenwald plus well-known radicals like Noam Chomsky, remains unclear. The list also includes a number of Occupy organizers, such as one of the Occupy Wall Street main organizers Kevin Zeese.
There is a lot of behind the scenes manipulation going on with this movement on the left as the Obama water carriers swing into coordinated action. Read the whole article and check out the examples.
The Obama campaign and Obama himself is trying very carefully to help craft the message so he can at least tentatively embrace the movement, characterize it as a populist movement and try to use it to give his re-election chances some momentum. Yesterday Obama made the comparison between the OWS movement and the civil rights movement of the ‘60s. Having been around for that, I’ve got to say I’m just not seeing it.
To this point, OWS is a ragbag confederation of the usual A.N.S.W.E.R groups and the movement still hasn’t issued any coherent statement of its purpose except to harass the rich and attempt to lay the blame for – well you name it—at their feet. As you’ll see, OWS now has “professional” help to help them put something together.
Obviously there is a lot of anger out there – we’ve known that for years, actually, as we’ve watched wave election after wave election take place and have witnessed the rise of the Tea Party.
But most of that anger and discontent was aimed at government. And that has put this Administration on the defensive. Where it could once claim outsider credentials, it is the government establishment now. Obama knows that if the focus of discontent stays on government, his re-election chances are not good.
However, this movement offers a perfect opportunity to shift focus and blame.
It comes as no surprise then that media water carriers and spin doctors along with the administration see this as an opportunity to expand on the class warfare meme and shift blame and focus away from government.
That’s the question the editorial staff asks and answers in an editorial written for the publication’s November 3rd edition.
The answer they give is a qualified “no”. Qualified in that while they sympathize with some of the points raised (which they note ironically are similar to those raised by the Tea Party), they find the movement mostly too radical.
One of the core differences between liberals and radicals is that liberals are capitalists. They believe in a capitalism that is democratically regulated—that seeks to level an unfair economic playing field so that all citizens have the freedom to make what they want of their lives. But these are not the principles we are hearing from the protesters. Instead, we are hearing calls for the upending of capitalism entirely.
Okay. Liberals are capitalists. Let that sink in. How does one seek to “level an unfair economic playing field” and claim to be a capitalist, where an unleveled playing field is almost a prerequisite to its economic success. That may sound odd, but it is capitalists who fund capitalism and they’re usually far and away richer than most of those who end up benefitting from the economic system.
The very people OWS is protesting.
Venture capitalists are usually found in the 1% the protesters are decrying. While I agree that under law, the playing field should be equal, crony capitalism (which isn’t capitalism at all) should be ruthlessly discouraged and government intrusion in markets dialed back to zero. I see neither of those latter two items on the liberal agenda. And remember – capitalism doesn’t claim to have a “level playing field”, but what it does promise is to be like a rising tide and lift all boats to a different and higher economic level of prosperity. Its record backs that claim.
So make what you will of the editorial’s claim about the liberal version of capitalism, however they are seeking to distance themselves from the OWS crowd because it seems to mostly represent those who anti-capitalist. However flawed the liberal idea of what constitutes capitalism, they at least acknowledge its worth and the fact that it is the basis of our success.
As Daniel Foster says – “let’s hold them to this” and make sure to remind them the next time they go on an anti-capitalist rant or write approvingly of government intrusion in the markets.
Uber liberal Oliver Willis rejects everything the New Republic says because, he claims, they’ve been wrong about everything in the past. I assume that passes for “critical thinking” in WillisWorld. Willis obviously finds the OWS platform, such that it is in all its anti-capitalist glory, to be pleasing enough in some form or fashion that he implies support.
In fact, I believe what the New Republic sees for the most part is a genuine but very small core of people who began this simply out of frustration and now have the usual radical, anti-capitalist, socialist A.N.S.W.E.R. professional protesters along with labor unions like the SEIU joining in and taking over the protest sensing a chance to again push their tired and failed agendas.
Dana Milbank gives an example on who or what has shown up at the Washington DC event in, well, less than impressive numbers:
But while the Occupy movement in the capital has invigorated left-wing groups — Code Pink, Veterans for Peace, Common Dreams, Peace Action, DC Vote, Community Council for the Homeless and a score of other labor and progressive organizations are represented on Freedom Plaza — it has not ignited anything resembling a populist rebellion. To swell their ranks, protesters recruited the homeless to camp with them.
Already, there are factions. While the Freedom Plaza group, calling itself “Stop the Machine,” prepared to storm the Hart building, an AFL-CIO group was planning a conflicting event on the plaza. A few blocks away, in McPherson Square, an outgrowth of Occupy Wall Street had established an encampment of a few dozen sleeping bags.
The Occupy movement is in the midst of being co-opted by the usual suspects. And that will bring the usual results. Rhetoric that most Americans will find offensive coupled with childish actions that will have those who tentatively support the movement drop them like a hot rock. Right now, of the “99%” out in flyover land, only 36% support the protests.
Anyway, Daniel Indiviglio at the Atlantic pretty much agrees with the New Republic and gives a reason that is more closely aligned with the progressive view of “capitalism” as it defines and supports it and as I’ve always understood them to believe:
The sort of anarchist-socialist radicals that can be found at the OWS protests threaten the progressive view that there are times when it is sensible and morally righteous for the government to intervene and prop up the economy, an industry, or even specific companies, if that action is thought to benefit the economy on a whole. The difference here is that the radicals think the occasional need for a bailout proves that capitalism is doomed and should be shuttered, while progressives believe that bailouts can help capitalism to work.
When you realize what is at the root cause of the problems we now are fighting to overcome, you realize the progressive version of “capitalism” is a failure. As usual, their instrument of change is the blunt force of government where one doesn’t have to convince, persuade or sell. Just dictate and do. That’s the antithesis of capitalism and markets.
I don’t think the word means what they think it means.
But don’t tell them … they really, honestly think they’re capitalists.
If you listen to those who are semi-coherent in the Occupy Wall Street crowd, they blame Wall Street for the financial straits we’re in. They’ve been convinced (and I’m sure for most it didn’t take much convincing) that it is the greed and recklessness of bankers and Wall Street tycoons which caused the housing bubble and subsequent financial collapse.
However Peter Wallison has taken the time and made the effort to lay out the entire sequence of government actions (and their subsequent consequences) which drove both the housing bubble and its collapse which put us in the financial position we’re in today.
As usual, it was government intrusion – in the name of social justice – that distorted the housing market and created incentives that otherwise wouldn’t have been there. Social engineering, with the best of intentions, that led to catastrophic unintended consequences.
The irony, of course, and what Wallison points out, is the OWS crowd is clueless at best or mendacious at worst. But the fault for our condition should be laid squarely in government’s lap. Where these protests should be taking place is in front of Congress, the White House, Fannie Mae and Freddie Mac and the Federal Housing Administration – not Wall Street.
Beginning in 1992, the government required Fannie Mae and Freddie Mac to direct a substantial portion of their mortgage financing to borrowers who were at or below the median income in their communities. The original legislative quota was 30%. But the Department of Housing and Urban Development was given authority to adjust it, and through the Bill Clinton and George W. Bush administrations HUD raised the quota to 50% by 2000 and 55% by 2007.
It is certainly possible to find prime borrowers among people with incomes below the median. But when more than half of the mortgages Fannie and Freddie were required to buy were required to have that characteristic, these two government-sponsored enterprises had to significantly reduce their underwriting standards.
Fannie and Freddie were not the only government-backed or government-controlled organizations that were enlisted in this process. The Federal Housing Administration was competing with Fannie and Freddie for the same mortgages. And thanks to rules adopted in 1995 under the Community Reinvestment Act, regulated banks as well as savings and loan associations had to make a certain number of loans to borrowers who were at or below 80% of the median income in the areas they served.
So there are the required guidelines – by law – enforced by government. And note, it wasn’t just Democrats. It was Republicans too. But the impetus and driving force behind all of this wasn’t Wall Street. It was government.
Research by Edward Pinto, a former chief credit officer of Fannie Mae (now a colleague of mine at the American Enterprise Institute) has shown that 27 million loans—half of all mortgages in the U.S.—were subprime or otherwise weak by 2008. That is, the loans were made to borrowers with blemished credit, or were loans with no or low down payments, no documentation, or required only interest payments.
Of these, over 70% were held or guaranteed by Fannie and Freddie or some other government agency or government-regulated institution. Thus it is clear where the demand for these deficient mortgages came from.
The huge government investment in subprime mortgages achieved its purpose. Home ownership in the U.S. increased to 69% from 65% (where it had been for 30 years). But it also led to the biggest housing bubble in American history. This bubble, which lasted from 1997 to 2007, also created a huge private market for mortgage-backed securities (MBS) based on pools of subprime loans. [emphasis mine]
Subprime loans, required by law to go to a certain percentage of applicants who otherwise wouldn’t get loans, built to half of all loans closed. Bubble created. Why? Because you’re talking about government “guaranteed” loans – safe money. That created a private market for MBS because the subprime loans in question would have been a poor risk on their own, but were a good risk with the government guarantee.
Demand grew, the bubble grew. But this was a foundation built on financial sand:
As housing bubbles grow, rising prices suppress delinquencies and defaults. People who could not meet their mortgage obligations could refinance or sell, because their houses were now worth more.
Accordingly, by the mid-2000s, investors had begun to notice that securities based on subprime mortgages were producing the high yields, but not showing the large number of defaults, that are usually associated with subprime loans. This triggered strong investor demand for these securities, causing the growth of the first significant private market for MBS based on subprime and other risky mortgages.
Again, because of who was holding or guaranteeing the loans, the real risk was masked, thereby triggering demand for these high-yield securities. How risky could they really be if they’re backed by the full faith and credit of the US, right?
And so the MBS market continued to grow:
By 2008, Mr. Pinto has shown, this market consisted of about 7.8 million subprime loans, somewhat less than one-third of the 27 million that were then outstanding. The private financial sector must certainly share some blame for the financial crisis, but it cannot fairly be accused of causing that crisis when only a small minority of subprime and other risky mortgages outstanding in 2008 were the result of that private activity.
And there is the salient point. No government intrusion, no government guarantees, no laws which “encouraged” or put quotas on loans with a certain percentage in the subprime category and no housing bubble, no demand for risky MBS, no financial crisis.
People, as they have for centuries, would have actually had to meet much stricter criteria for a loan and fewer would have owned homes. The market would have stayed stable, no bubble would have developed and we’d not be in the shape we’re in today. Oh, don’t get me wrong – government would still be out of control and on it’s eternal spending spree – but we wouldn’t have the added financial stress of a recession caused by government.
When the bubble popped, the inevitable happened:
When the bubble deflated in 2007, an unprecedented number of weak mortgages went into default, driving down housing prices throughout the U.S. and throwing Fannie and Freddie into insolvency. Seeing these sudden losses, investors fled from the market for privately issued MBS, and mark-to-market accounting required banks and others to write down the value of their mortgage-backed assets to the distress levels in a market that now had few buyers. This raised questions about the solvency and liquidity of the largest financial institutions and began a period of great investor anxiety.
The government’s rescue of Bear Stearns in March 2008 temporarily calmed the market. But it created significant moral hazard: Market participants were led to believe that the government would rescue all large financial institutions. When Lehman Brothers was allowed to fail in September, investors panicked. They withdrew their funds from the institutions that held large amounts of privately issued MBS, causing banks and others—such as investment banks, finance companies and insurers—to hoard cash against the risk of further withdrawals. Their refusal to lend to one another in these conditions froze credit markets, bringing on what we now call the financial crisis.
And there’s the real litany of how what happened happened. Market distortion by government is the real cause of this debacle. We’ve been pointing this out for quite some time. The problem, of course, is the unintended consequences of such intrusion seem never to be understood by the lawmakers and technocrats who come up with these sorts of grand social justice schemes. And again, understand that it wasn’t just the Democrats who helped this all along.
The bottom line however, as Wallison points out, is that while Wall Street isn’t blameless in all of this, their role, in comparison, is minor. The entire scenario was government inspired. However, that’s not what has been sold to the public. Instead we’ve gotten propaganda and class warfare in a blatant attempt to shift the blame to private concerns:
The narrative that came out of these events—largely propagated by government officials and accepted by a credulous media—was that the private sector’s greed and risk-taking caused the financial crisis and the government’s policies were not responsible. This narrative stimulated the punitive Dodd-Frank Act—fittingly named after Congress’s two key supporters of the government’s destructive housing policies. It also gave us the occupiers of Wall Street.
Indeed. If anyone needs to be in jail it is the perpetrators of the government policy that encouraged/required the market distortion that led to the bubble and ultimately collapse of the housing market.
That wasn’t Wall Street. What happened in the financial community is they reacted to an incentive created and supposedly guaranteed by government. But it was unsustainable. And it finally came to a head, dealing financial destruction all around.
Here’s the bottom line – no government intrusion, no incentive/requirement to push subprime loans. No subprime loans (especially in the amount required by government), no housing bubble. No housing bubble, no financial crisis. No financial crisis, no OWS, who simply have it all wrong.
But then, given the government propaganda effort to this group who want to believe what government is claiming, is anyone surprised?