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Would the Last Honest Reporter Please Turn On the Lights? | jonmower.com

Would the Last Honest Reporter Please Turn On the Lights?

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Folks are loving Orson Scott Card's opinion piece of the same title (link) in which he calls out the media for what he sees as its dishonesty in not assigning blame for the sub-prime crisis to the Democrats.  Let me first say that I like Card's science fiction books and that I agree that the Democrats deserve some of the blame.  However, I find it funny that the editor's note highlights that Card is a Democrat.  From what I can tell from Card's actions of the last few years, he's a Democrat in the mold of Zell Miller and Joe Lieberman.  Furthermore, an alternative explanation to Card's charge of dishonesty is that the press has not championed the theory that Card describes because reality is not as simple and straightforward as he claims. Obviously, giving too much credit to people who can't afford it has consequences, but half the sub-prime mortgages were from institutions not subject to the Community Reinvestment Act (link). Furthermore,

...the reason for the financial collapse is that debt was chopped up and marketed as mortgage-backed securities to financial institutions all over the world. If the debt hadn't been sold...the bad debt wouldn't have been integrated into the rest of the financial system and it would have just led to the collapse of the original institutions providing mortgages. In other words, it wasn't the debt itself; it was the very lucrative selling of the debt that got us where we are today.

It was Phil Gramm who championed the Financial Services Modernization Act that allowed that allowed those shenanigans. The blame doesn't just belong with the Dems.

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No one is saying that CRA

No one is saying that CRA loans alone caused the crisis, and that that's the reason the democrats are to blame.

CRA primed the pump, by adding a large number of buyers into the housing market, that had previously been omitted due to the high likelihood of defaulting. This caused prices to skyrocket... which got this whole thing going. There's plenty of blame to go around, but there is a case to be made that without two things, the CRA (and promotion of home ownership for those who couldn't afford it) and the artificially low interest rates, sent the housing market out of control, and it gave banks confidence to be able to make loans to anyone, with little or not down payment, because they believed house prices would continue to rise.

If the government doesn't start telling banks who to loan to, and how to do it, this ball never gets rolling.

You may not be saying it,

You may not be saying it, but others have been saying it to me. And you kind of just did too with the ball rolling comment. But I'm not saying it wasn't part of the problem or that the Republicans deserve all the blame...just that the Democrats don't deserve all of it either. And that there is not an epidemic of dishonesty among the press.

Well, anyone that is telling

Well, anyone that is telling you that CRA was the lone cause of the crisis is an idiot. There is no getting around it.

Politics aside, the cause, in a macro sense, was government intervention in the markets. If governments don't get involved, with fannie and freddie, with artificially low interest rates, with all sorts of home ownership legislation, banks don't make the loans they did. They made the loans they did because of the moral hazard of fannie and freddie promising to buy all sorts of loans that banks wouldn't ever have kept on the books, they made loans because government intervention caused house prices to accelerate out of control for a long period of time leading people to believe houses would ONLY GO UP. They made loans they did cause they knew the government would bail them out if they went belly up. Government intervention, Republican and Democrat, was right in the middle of this. Now I think there was a little more blame on one side than the other, but only because one side has a little more tendency to intervene in the market when the market doesn't do what it wants. That's not arguable. But you are right, that one party isn't solely to blame.

Where I disagree with that

Where I disagree with that is the implication is that the only problem was that the markets were interfered with and (admittedly exaggerating your perspective) that we'd have heaven on earth if we'd just let the markets run free. Though I'm no expert, I understand that there are often unintended consequences when markets are interfered with, but I also believe that checks and limits are necessary to limit excesses and to prevent the markets freely taking us to places we don't want to go.

Right. The thing about

Right.

The thing about capitalism is this. Businesses should self regulate. Those that do not, will go out of business. They have a vested interest in transperancy because investors reward companies that let them know what's going on. Those that cheat the system fail.

If the government got out of the system completely, that means allowing competition in currency and anything else, that would allow a sound financial system, because anyone that tries to debase their currency through fractional reserve banking, which is part of our problem now (leveraging WAY too much) you wouldn't have these bubbles, and the economy would grow when productivity increased, rather than when the government just flooded the system with nearly free "capital"

Its way too complicated a thing for either of us to discuss over a blog. I'm talking a lot of theory, because what I'd propose has never been attempted in this country, or really anywhere, so...

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