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Monday, January 11, 2010

Conservatives Play Pin the Fail on the Donkey's Fannie

Richard Green notes another case of conservatives trying to support their ideological preconceptions using evidence that doesn't withstand closer examination. The larger goal here is to pin the blame for the housing crisis on the government, to avoid further regulation of the financial industry, and to reinforce their faith in free markets. The intent is also to pin the blame on Democrats and deflect blame away from deregulation supported by Republicans which, in the view of free market ideologues, could not have been responsible for the crisis:

The biggest stretch I have yet seen for blaming Fannie for the world's problem, by Richard Green: Micky Kaus, who seems to have trouble sleeping at night for fear that some below median income person somewhere might actually benefit from government, attacks Jim Johnson, former CEO of Fannie Mae, for contributing to our current woes.

The problem is that Johnson ran the company from 1991-1998; I am guessing that few mortgages from his tenure are even around anymore, and if any are, their balance is so much lower than the value of the house supporting them (house prices are still much higher than in 1998, and the loan would have amortized a lot), that the incentive to default is non-existent.

Of course, in the piece he approvingly quotes Peter Wallison, an AEI "scholar" who never met a bank he didn't like.

Over the years, Fannie has done plenty of things not to like. But jeez!

    Posted by on Monday, January 11, 2010 at 12:33 AM in Economics, Housing, Regulation | Permalink  TrackBack (0)  Comments (21)

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