Free Markets, Free People

Occupy Wall Street

Adam Carolla explains OWS

It is an interesting 9 plus minutes because Carolla talks about something we’ve noted here any number of time. The entitlement mentality that has crept into the society. The belief that people are entitled to what others have, whether or not they’ve earned it or not. Carolla talks about the "participation trophy". He also mentions how reality deals with that and the result.

LANGUAGE WARNING – strong language

 

 

He pretty much nails what we’re seeing in the OWS protests.  Interesting point about how shame is being used.   Instead of being ashamed you haven’t accomplished what others have, those that are supposed to be ashamed are those that have accomplished things.

Just listen to the President, who, btw, is the first of that particular wave of “participation trophy” awardees to reach the highest office in the land.

~McQ

Twitter: @McQandO

OWS: Fail

So what do the real 99% think about the motley .0001% trying to represent themselves as the majority?

Not so much:

A new USA TODAY/Gallup Poll shows that the "Occupy" movement has failed to capture the attention of a majority of Americans, indicating either ambivalence toward it or lack of interest.

The poll finds that 56% of Americans surveyed are neither supporters nor opponents and 59% say they don’t know enough to have an opinion about the movement’s goals.

The survey, however, does show an increase from 20% to 31% in disapproval of the way the protests are being conducted.

If Occupy Wall Street’s goal was to capture the attention of America and spark a movement that would change its face (even if it isn’t exactly sure what it wanted that change to look like), it has apparently failed, if this poll is any indication.

Majorities didn’t know or care much about them and also weren’t paying enough attention to them to understand if they had any goals and if they did, to have an opinion about them.

In effect OWS has been reduced to a side show that surfaces again every now and then when some new outrage is discovered to have happened among the protesters.

I assume that even the slowest among the Democrats has effectively abandoned OWS by now.

~McQ

Twitter: @McQandO

Public support for OWS drops dramatically

Apparently the public has seen and read enough about Occupy Wall Street to make up its mind that it isn’t something it supports.

According to a Public Policy Polling survey, support for OWS has dropped rapidly as more and more reports detail theft, violence, rape, and all sorts of other anti-social behavior (such as defecating in the street) among its participants.

Only 33% now say that they are supportive of its goals, compared to 45% who say they oppose them. That represents an 11 point shift in the wrong direction for the movement’s support compared to a month ago when 35% of voters said they supported it and 36% were opposed. Most notably independents have gone from supporting Occupy Wall Street’s goals 39/34, to opposing them 34/42.

Note again the all important demographic (independents) in which the big switch has occurred.  Democrats who’ve hitched their wagon to OWS should begin deserting it like rats deserting a sinking ship when they see these results.

As for the claim that OWS is more popular than the Tea Party?  Yeah, not so much:

Tea Party 43%, Occupy Wall Street 37%. Last month, Occupy Wall Street had a narrow advantage of 40%-37%.

Among independents:

Again the movement with independents is notable- from preferring Occupy Wall Street 43-34, to siding with the Tea Party 44-40.

That said, the issue OWS supposedly represents is still alive and well even if it is a misinformed position:

I don’t think the bad poll numbers for Occupy Wall Street reflect Americans being unconcerned with wealth inequality.  Polling we did in some key swing states earlier this year found overwhelming support for raising taxes on people who make over $150,000 a year. In late September we found that 73% of voters supported the ‘Buffett rule’ with only 16% opposed.  And in October we found that Senators resistant to raising taxes on those who make more than a million dollars a year could pay a price at the polls. I don’t think any of that has changed- what the downturn in Occupy Wall Street’s image suggests is that voters are seeing the movement as more about the ‘Occupy’ than the ‘Wall Street.’  The controversy over the protests is starting to drown out the actual message.

This is most likely true since most people don’t understand that the economics of earnings isn’t a zero sum game.  On the one hand the left has done a good job of selling the idea that income inequality  is important and can be solved through higher taxes on the so-called or relatively “rich”.

Of course that’s nonsense.  That said, OWS is now more of a detriment than a asset to that cause if this poll is to be believed.   And that means the usual thing for politicians with their fingers firmly in the political wind – those who have embraced the OWS protestors will be trying to find a way to desert and then denounce the rabble.

OWS will linger – today they’re going to try to rally in NYC on Wall Street – but I’d argue we’ve seen the movement’s high tide.  I will now recede into a mere annoying shadow of itself as support is withdrawn by political figures and organizations.  And, of course, you can count on participants getting even more desperate to rally support and I think we all know what that means.  More excess, more stupidity, less support.

I say good riddance.

~McQ

Twitter: @McQandO

Banks are bad … unless you need one

OWS continues to expand its litany of hypocrisy almost daily, but this one may take the cake.  A protest aimed at Wall Street and bankers, one would think that such a protest would eschew any connection with banks during its protest.  No?

No:

Last week, one or more Occupy Oakland protesters smashed the windows of a Wells Fargo branch.

This week, the group’s general assembly agreed — in a near-unanimous vote Monday — to temporarily place $20,000 of the group’s money in an account at the country’s fourth-largest bank holding company, Wells Fargo Bank.

Yes friends, the “general assembly” of a protest aimed at banks and bankers has used a bank to protect their donations.  In fact, the vote was 162-8.  Apparently only those voting “no” recognized the absurdity of the decision given their position on banks.

But obviously the majority feared the money wasn’t safe in and among the crowd of protesters.

Go figure.

As for the irony of the decision – missed it completely apparently.  Some of their supporters, sounding off on Twitter, didn’t:

“I am so disgusted right now. the hypocrisy of it all is just amazing,” wrote @GiveMeThatJuice.

“ARE YOU F—— SERIOUS?!,” wrote @graceface.

“I can see the ad now: ‘People’s money is so safe here at Wells Fargo, even our sworn enemies use us for their banking needs!’” wrote @davidcolburn.

You just can’t make this stuff up.  Well, you can, but with this bunch there’s no need.

~McQ

Twitter: @McQandO

Observations: The QandO Podcast for 06 Oct 11 (UPDATED)

In this podcast, Bruce Michael, and Dale discuss Herman Cain, the Occupy Movement, and Europe.

UPDATE: Well, no sooner do I post this podcast where I question why the Chinese would be interested in pouring some money into the European Stabilization Fund, the Chinese provide an answer. They wouldn’t.

Also last night, the chairman of the supervisory board of China Investment Corporation, the country’s sovereign wealth fund, put further distance between China and the eurozone bail-out, saying that Europe’s bloated welfare state meant that people did not work hard enough.

“I think if you look at the troubles which happened in European countries, this is purely because of the accumulated troubles of their worn out welfare societies,” Jin Liqun said in an interview with Al Jazeera television. “I think the labour laws are outdated – the labour laws induce sloth, indolence rather than hard working. The incentive system is totally out of whack.”

Eurozone leaders had been hoping that China would use some of its trade surplus to back the bail-out fund.

Now they need to hope something else.

The direct link to the podcast can be found here.

Observations

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OWS in a nutshell

Jim Geraghty’s “Morning Jolt” (besides a quote from one of my posts – thank you) had this from blogger Brady Cremeens .  It sums up OWS, as I’ve watched it over the weeks, pretty well.  And, as usual the irony impaired left has missed it completely.

Cremeen’s discussion is spot on:

In a hilariously idiotic display of irony, Occupy Wall Street is experiencing firsthand the failure of the system they are clamoring for. They squabbled over how to properly distribute the over half a million dollars in donations they received.  Some people felt they deserved more because they were doing more activist work, versus those who spent their occupying days playing drum circles or doing, well, nothing. What’s incredible is that the same people arguing over how to redistribute the wealth given them are pushing for a complete American system of wealth redistribution. They see no correlation between their own inability to “fairly” distribute money and that government mandated wealth distribution would just assuredly fail as well, but on a massive, nation-shaking economic scale.

Similarly, the kitchen staff at Occupy Wall Street ran into problems when they felt they shouldn’t have to prepare food for the “homeless and free loaders”. In summary, the group fighting for a socialist nation where everyone is equal regardless of output refuses to serve those who aren’t doing their share. Apparently, hypocrisy and irony are foreign concepts to the Occupy crowd.

What is perhaps most disconcerting is not that a few college kids and hippies are upset about student loans and mortgages, but that this clearly sordid movement has the complete support of major players in the American political system and media. Elizabeth Warren claims to be the “brains behind Occupy Wall Street” (insert joke here), Nancy Pelosi, Joe Biden, and the President himself have all spoken in support of the protests.

It’s the apparent discovery that their system doesn’t work right in the middle of demanding that system be imposed which has me laughing and shaking my head.

The metaphor he uses is perfect:

Asking “Where did the Occupy movement go wrong?” is akin to musing “Where did Michael Moore’s fitness regime fall apart?” The answer: early, often, all over the place.

Yet for some reason, the left, Democrats and the media are embracing it.

The big question is “why”?   Why do they consider this a valuable movement to which they want to attach their political credibility?  What happens when, and it will, it all goes sour.

Consider (from Ace of Spades):

Verum Serum has been on this doggedly. For reporting the truth, of course, Mother Jones and left-wing blogs like Alternet  implied he was part of a right-wing "smear campaign."

Girls are getting raped at these events. That is not particularly the Occupiers’ fault. In any group, there will be some criminals.

What is their fault is discouraging the girls from reporting the rapes, in the interest of PR for the movement. Apparently talking the position that girls should just close their eyes and think of England.

The ABC report John partially praises fails to mention that fact about Occupy.

In a video by Lee Stranahan and Brandon Darby, one disgruntled Occupier is leaving, because someone on the Sanitation Team (???) took a swing at him, and then the Public Relations Praetorian Guard immediately swept in and began telling him no one took a swing at him.

These droids? What droids? Oh these droids.

These aren’t the droids you’re looking for.

Again, if the charges weren’t so serious, the situation would be entirely laughable.  What’s also apparent is the movement is degenerating into what critics predicted it would even while the press continues to give it an overall shine.  One can’t help but think of a rotting fish on the beach with glittery scales.

They are creating a society within their encampment that they’re discovering doesn’t work even while demanding that society be imposed on the whole.  How the press manages to miss that is beyond me.  Well not really.   And it certainly isn’t at all surprising that the left misses it.

But my guess is, when this all degenerates to the state of chaos and violence that the Democrats will end up holding the proverbial political bag of dog poo and trying to explain their way out of supporting this mess.

Should be fun to watch.

~McQ

Twitter: @McQandO

OWS and NY neighborhood not getting along at all

Yes the rabble that calls itself Occupy Wall Street has those that live in the neighborhood of Zuccotti Park less than receptive to them or whatever their still undefined message is:

"They are defecating on our doorsteps," fumed Catherine Hughes, a member of Community Board 1 and a stay at home mom who has the misfortune of living one block from the chaos. "A lot of people are very frustrated. A lot of people are concerned about the safety of our kids."

See, the rabble demand “rights” but they apparently can’t find it in themselves to respect the rights of others, such as property.

Or the ability to walk down a street without being harassed:

Fed up homeowners said that they’ve been subjected to insults and harassment as they trek to their jobs each morning. "The protesters taunt people who are on their way to work," said James Fernandez, 51, whose apartment overlooks the park.

Or something as simple as keeping the noise in the neighborhood down:

"It’s mostly a noise issue," he said. If people can’t sleep and children can’t sleep because the protesters are banging drums then that’s a problem."

[…]

One elderly woman told a protester to stop screaming and was met with an even higher volume. "Get some earplugs!" retorted David Spano. "This is the street. I can say whatever I want! I can’t calm down, I’ve been struggling for 30 years!"

Nothing more ignorant than a man who claims his “rights” preclude any responsibility to anyone else.  Most understand that as both selfish and clueless.  Respect the rights of others?  Hey, this is a “revolution”, he’s been struggling for 30 years and that gives him better  “rights”.

At a standing room only Community Board meeting, members of the community voiced their anger, frustration and indignation to board members who essentially agreed.  They want something done.

Now comes the fun part for Mayor Michael Bloomberg.  These people complaining are voters.   They’re the people who put him in office.   They want action.

Stay tuned.

~McQ

Twitter: @McQandO

How to respond to #OWS

My esteemed colleague George Scoville brought to my attention a post about how Republicans are making a mistake in their responses to the Occupy Wall Street protests/movement.  John S. Wilson at Mediaite argues that mocking OWS, tying the unruly protestors to the Democrats, and waiting for the protests to fade is just how Democrats set themselves up for a beating by the surprisingly resilient Tea Party.

Wilson is right: conservatives are underestimating OWS. While individual protestors on camera often have no idea what they’re talking about, that’s typical for a large protest; it doesn’t mean OWS is bound to flop.  Unless Republicans think Obama won such a convincing victory in ’08 because the voters knew him so well, they should absolutely take this movement seriously and respond energetically.

That said, a few of Wilson’s points are false.  Like:

“The message is as clear as the implications: income inequality has gotten out of control and is untenable.”

Is that what OWS is about?  Seemed to me that the original demand was to remove money from politics.  And why Wall Street if it was just about income inequality and not, say, bailouts and financial reform?  Why are there enough anti-war protestors to take notice?  Why haven’t they been able to organize around a clear income-equality agenda?

In any case, the best counter-messages so far have been the ones that place a wedge between the protestors and the Democrats who they might vote for.
  • Once they were reminded of how much money Obama got from the financial sector, Democrats were forced to get into the weeds about who’s getting more money from Goldman Sachs et al.
  • The anti-war protestors have to contend with the fact that it’s been Democrats running those wars, and getting involved in new ones, for the last 3 years.
  • The stimulus and bailout bills had plenty of giveaways to large corporations, many of whom were allies of Democrats who voted for those bills.
  • Student loan forgiveness is the worst stimulus policy ever, especially when college grads have a low unemployment rate and the average 2011 college graduate starts at over $50,000 — instantly vaulting them into the top 25% of incomes.

They’ll still think Obama is better than the Republican, but the idea is to make them less energetic supporters.

The college grad thing brings me to another misconception:

“that [tax cuts] message probably isn’t endearing to rural white voters who make less than $40,000 a year. How could it be?”

This is just denial.  Those voters voted GOP in 2010 when it was all about fiscal issues and Big Government.  What does Wilson think has changed about the GOP message since then?

Democrats keep thinking that if they promise to pick Group A’s pocket to give to Group B, Group B will always love them.  But electoral politics is less about policy than signaling loyalties and aspirations. What do the rural white low-to-middle-income voters see on TV and in photos?

  • a bunch of urban college kids bleating to have their loans forgiven
  • the usual screamers and hippies protesting war (is that endearing to the typical Southern or rural family? and does the anti-Israel contingent appeal to evangelicals?) and fossil fuels (which goes over really well in coal towns and places where families are supported by oil jobs)
  • city folk fighting with cops and local businesses and generally trashing their surroundings
  • bongo drums and twinkle fingers and “the people’s microphone”
  • unions openly organizing at these events

When they see that, they don’t think, “Hey, those are the kind of people who will look out for me.  Let’s give them a shot.”  They’re thinking, “Those are the unwholesome whiners who call me a hick and want to shutter the local factory when they’ve never worked as hard as I do.”

It doesn’t help the Dems that they’re technically the party in power, and have had the upper hand since early 2009.  This would be more fertile ground for Tea Partiers if they hadn’t become so associated with political division and gridlock; they should concentrate more on unifying policies like:

  • good government
  • opposition to bailouts or any special favors for special interests, especially Big Business
  • requiring that military interventions involve a clear national interest, which can be mixed with a message of maintaining support for the troops

Offering conservative/free-market solutions on each of those things takes the wind out of OWS’s sails.  Tax reform, more transparency/accountability in government, opposing all energy subsidies instead of just the “green” ones, etc.

That’s how I’d respond to OWS.  This is precisely the time for Tea Partiers to go out and remind everyone that they’re better-behaved protestors who are running against Washington and against special interests, and to remind the other side that the small-government folks still have energy of our own, and challenge OWS on just who they think their champions are.

Bryan in fewer than 800 words: Follow Bryan on Twitter.

Should Liberal’s support Occupy Wall Street?

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. 

Why?  Well here’s the reasoning that struck me as interesting:

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. 

~McQ

Twitter: @McQandO

Why Occupy Wall Street has it wrong

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.

Moving on:

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?

~McQ

Twitter: @McQandO