The GOP Blames the Victim

[question everything]

The GOP Blames the Victim
Capitalism sure is fragile if subprime borrowers can ruin it.
By THOMAS FRANK


(snip)

But I had forgotten about conservatives' extraordinary instincts for blame-evasion. This is a movement, after all, that blandly recasts its greatest idols as traitors once their popularity has crashed; that routinely sloughs off responsibility for . . . well . . . anything since, by its logic, conservatism has never really been tried in the first place. Consider in this respect Mitt Romney's remarkable speech to the Republican convention a few weeks ago, in which he rallied his party against Washington -- a place his party has controlled, to one degree or another, for nearly three decades -- by listing the city's various institutions and crying, "It's liberal!" Or consider the way the House Republicans torpedoed the bailout bill a few days ago. The real reason they did it was almost certainly to evade responsibility for an unpopular measure but the announced reason seemed designed to convince the nation's 7-year-olds -- because Nancy Pelosi said something mean.

(snip)

There is no doubt that Fannie and Freddie enabled the subprime neurosis, but for certain conservatives they are virtually the only malefactors worth noting. The dirge goes like this: Fannie and Freddie were buying up subprime mortgages, and they were doing it for (liberal) political reasons. Mortgage originators thus had no choice but to hand out mortgages like candy. Had market forces been in charge, loans would, no doubt, have been administered with a rigor and sternness to make John Calvin blanch.

I asked Bill Black, a professor of economics and law at the University of Missouri-Kansas City and an authority on the Savings and Loan debacle of the 1980s, what he thought of the latest blame offensive. He pointed out that, for all their failings, Fannie and Freddie didn't originate any of the bad loans -- that disastrous piece of work was done by purely private, largely unregulated companies, which did it for the usual bubble-logic reason: to make a quick buck. Most of the mistakes for which we are paying now, Mr. Black told me, were actually made "by four entities that under conservative economic theory should have exercised effective market discipline -- the appraisers, the originators of the mortgages, the rating agencies, and the investment banking firms that packaged the subprime mortgage-backed securities." Instead of "disciplining" the markets, these private actors "served as the four horsemen of the financial apocalypse, aiding the accounting fraud and inflating the housing bubble." It is they, Mr. Black says, who "turned a crisis into a catastrophe."

(snip)

There is no way to measure the number of people who took out mortgages they knew they couldn't afford, of course, but for what it's worth, a 2007 report by the Mortgage Bankers Association reports that the FBI estimates "80 percent of all reported fraud losses arise from fraud for profit schemes that involve industry insiders." That means the lenders, not the borrowers.

Just imagine the flights of fancy that the theory of borrower malevolence and Wall Street victimization requires conservatives to take: All these no-account folks, you see, got together and forced investment banks to engineer subprime mortgages into highly leveraged securities. Then they tricked all manner of hedge funds and pension funds and financial institutions into buying these lousy products. Just for good measure, these struggling homeowners then persuaded bond-rating agencies to misrepresent the risk associated with these securities.

(snip)

http://online.wsj.com/article/SB122282690823092989.html?mod=todays_us_opinion

[Tandalayo_Scheisskopf]

1. Holy Encoule'!

They actually printed this, by a real and actual Thomas Franks, in the real and actual WSJ?

I think I am having an attack of the vapours.

[question everything]

3. Indeed. Thomas Frank is now a columnist for the WSJ

and every article of his is a gem.

[Hydra]

2. Oh, that's nothing

This crisis had a timer built into it. One of Greenspan's friends bailed just before the bubble burst with $4 Billion in profits on a "hunch." The Gov't was running banks that were pushing subprime loans. Bush trampled on state efforts to apply their own laws to stop all of this.

Blame??? This wasn't a "mistake"- this was a strategy, right down to the current bailout. No homeowners helped, crisis continues, more taxpayer money required to keep the ship of doom afloat.

[WildClarySage]

4. A good friend is an appraiser-

she tells me that the banks put pressure on the appraisers to value properties higher than they ought to go for, and those who refuse to play that game tend to get less and less repeat business. The borrower has to assume the higher costs because all available properties are overpriced.

[question everything]

5. Yes, I've heard about it

and I think that some years back there were even some indictments.