The Blog

Required Reading: Looking Back in Anger

3:43 PM, Sep 22, 2008 • By DEAN BARNETT
Widget tooltip
Single Page Print Larger Text Smaller Text Alerts

From Bloomberg, "How the Democrats Created the Financial Crisis" by Kevin Hassett

This being a time of crisis, it is no time for finger pointing. Then again, why not?

In this searing and much-discussed piece, Hassett explores who is responsible for enabling the twin ticking time bombs of Fannie Mae and Freddie Mac to endanger the entire economy. Hint: One of the presidential candidates is a culprit. Additional hint: He's not the one who served in Vietnam:

If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions. Without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed.

But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.

That such a reckless political stand could have been taken by the Democrats was obscene even then. Wallison wrote at the time: ``It is a classic case of socializing the risk while privatizing the profit. The Democrats and the few Republicans who oppose portfolio limitations could not possibly do so if their constituents understood what they were doing.''

Now that the collapse has occurred, the roadblock built by Senate Democrats in 2005 is unforgivable. Many who opposed the bill doubtlessly did so for honorable reasons. Fannie and Freddie provided mounds of materials defending their practices. Perhaps some found their propaganda convincing.

But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.

Perhaps the senators' credulity regarding Fannie and Freddie's propaganda and the behemoths' campaign contributions are merely an inconvenient coincidence. Then again, perhaps not.

You'll want to read the whole thing.