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The Sub-prime Blame Game

by Christopher Chantrill
March 11, 2007 at 5:24 pm

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THANK GOODNESS the Plame Game is over and Scooter Libby safely convicted for—what exactly was it? Now we can concentrate on the next Big Thing; the meltdown in the sub-prime mortgage market.

As a veteran broker commented: “Anyone could have seen that was coming.”

After “Bush Lied” it’s “liar loans.”

Even The New York Times has noticed. Gretchen Morgenson warned March 11, 2007 of trouble ahead in “Crisis Looms in Market for Mortgages.” On March 1, 2007, she advised, an “analyst at Bear Stearns wrote an upbeat report on a company [New Century Financial] that specializes in making mortgages to cash-poor homebuyers,” By Friday’s close, NEW had collapsed from $30.25 per share on February 1 to $3.21.

The only thing that is uncertain is just how President Bush is to blame for the whole thing. But never fear: the central skill of practical politics is to take the latest systemic government failure that “anyone could have seen was coming” and confidently blame it on the president.

In the current mortgage meltdown the president is clearly responsible for permitting the development of a “liar loan” market, the “stated income” mortgage loans in which the borrower merely states his/her income in a loan application without having to back it up with documentation.

The very idea! It violates the first principle of the welfare state that people are helpless and not to be trusted in the normal transactions of adult life. Mr. President, how could you allow innocent working families to lie themselves into foreclosure and bankruptcy?

It’s a pity that Mike Wallace is no longer the lion of the ambush interview that he was in his prime. “You mean to say,” he would have bellowed to a humble loan officer, “You mean to say that no check is made of an applicant’s income?”

There ought to be a law.

There ought to be a law about the ridiculous level of subsidy for home ownership: the mortgage interest deduction, the federally insured home loans, the government-sponsored enterprises like Fannie Mae and Freddie Mac that are issuing oceans of mortgage debt. All these government programs conspire to raise the price of housing above that which would obtain in an unhampered market for housing and mortgage loans. When events conspire to create a perfect storm, combining subsidy, environmentalist “smart growth” restrictions, and record low interest rates needed to stave off deflation after the NASDAQ crash, well, you could have seen it coming: a mega-boom followed by a bust.

There ought to be a law.

Bu let us look at the big picture. Let us look at the big things that we spend money on. There is housing, health care, education. Those are the big three. Then there is transportation, food, clothing, housewares, recreation, savings. Then there is taxes.

Notice anything? The big three--housing, health care, and education--are so important that the governing class feels a compelling need to supervise them in detail.

(Notice also that housing, health care and education are areas in which women instinctively focus their interest. Is that why the governing class is so interested in supervision? The little lady just can’t be trusted to act responsibly?)

The result is that the big three are completely screwed up. Health care is screwed up because its third-party payment scheme encourages people to treat health care as a free resource. Education is screwed up because it is a government monopoly and people are powerless to seek out an education adapted to the individual needs of their children. They must take what they are given. Unable to exercise choice in health and education directly people--that is to say, women--focus all their energies and resources on housing, bidding up the price of housing in areas with good schools. Government adds fuel to the fire by subsidizing everyone’s housing dollar.

The result, as Mark Steyn has written, is that average westerners have become adult teenagers, provided with pocket money to buy fancy houses, cars, and home electronics, but powerless to make the important decisions in their lives.

One fine day we are going to stumble upon the radical notion that people ought to pay for the necessaries of life with their own money and with the minimum of privilege, subsidy and government control. Progressive people will declare it to be a question of human rights. Practical people will declare it to be a matter of common sense. Readers of The New York Times will confidently pronounce at fashionable dinner parties that the policy mix of subsidy in housing, third-party payment in health care, and compulsion in education that obtained at the turn of the twenty-first century was a disaster waiting to happen.

Anyone could have seen it coming and it was all Bush’s fault.

Meanwhile you can expect that your average presidential candidate and your average White House reporter will suddenly become experts in the “liar loan” department.

Christopher Chantrill blogs at americanmanifestobook.blogspot.com.

Buy his Road to the Middle Class.

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Responsibility

Seeckt: "to make of each individual member of the army a soldier who, in character, capability, and knowledge, is self-reliant, self-confident, dedicated, and joyful in taking responsibility [verantwortungsfreudig] as a man and a soldier."
MacGregor Knox et. al., The dynamics of military revolution, 1300-2050

Living the Virtues

When recurrently the tradition of the virtues is regenerated, it is always in everyday life, it is always through the engagement by plain persons in a variety of practices, including those of making and sustaining families and households, schools, clinics, and local forms of political community.
Alasdair MacIntyre, After Virtue

Moral Imperatives of Modern Culture

These emerge out of long-standing moral notions of freedom, benevolence, and the affirmation of ordinary life... I have been sketching a schematic map... [of] the moral sources [of these notions]... the original theistic grounding for these standards... a naturalism of disengaged reason, which in our day takes scientistic forms, and a third family of views which finds its sources in Romantic expressivism, or in one of the modernist successor visions.
Charles Taylor, Sources of the Self

US Life in 1842

Families helped each other putting up homes and barns. Together, they built churches, schools, and common civic buildings. They collaborated to build roads and bridges. They took pride in being free persons, independent, and self-reliant; but the texture of their lives was cooperative and fraternal.
Michael Novak, The Spirit of Democratic Capitalism

Society and State

For [the left] there is only the state and the individual, nothing in between. No family to rely on, no friend to depend on, no community to call on. No neighbourhood to grow in, no faith to share in, no charities to work in. No-one but the Minister, nowhere but Whitehall, no such thing as society - just them, and their laws, and their rules, and their arrogance.
David Cameron, Conference Speech 2008

Faith and Politics

As far as the Catholic Church is concerned, the principal focus of her interventions in the public arena is the protection and promotion of the dignity of the person, and she is thereby consciously drawing particular attention to principles which are not negotiable... [1.] protection of life in all its stages, from the first moment of conception until natural death; [2.] recognition and promotion of the natural structure of the family... [3.] the protection of the right of parents to educate their children.
Pope Benedict XVI, Speech to European Peoples Party, 2006

Never Trust Experts

No lesson seems to be so deeply inculcated by the experience of life as that you should never trust experts. If you believe doctors, nothing is wholesome: if you believe the theologians, nothing is innocent: if you believe the soldiers, nothing is safe. They all require their strong wine diluted by a very large admixture of insipid common sense.
Lord Salisbury, “Letter to Lord Lytton”

Conservatism's Holy Grail

What distinguishes true Conservatism from the rest, and from the Blair project, is the belief in more personal freedom and more market freedom, along with less state intervention... The true Third Way is the Holy Grail of Tory politics today - compassion and community without compulsion.
Minette Marrin, The Daily Telegraph

Class War

In England there were always two sharply opposed middle classes, the academic middle class and the commercial middle class. In the nineteenth century, the academic middle class won the battle for power and status... Then came the triumph of Margaret Thatcher... The academics lost their power and prestige and... have been gloomy ever since.
Freeman Dyson, “The Scientist as Rebel”

Government Expenditure

The Union publishes an exact return of the amount of its taxes; I can get copies of the budgets of the four and twenty component states; but who can tell me what the citizens spend in the administration of county and township?
Alexis de Tocqueville, Democracy in America

Conservatism

Conservatism is the philosophy of society. Its ethic is fraternity and its characteristic is authority — the non-coercive social persuasion which operates in a family or a community. It says ‘we should...’.
Danny Kruger, On Fraternity

Postmodernism

A writer who says that there are no truths, or that all truth is ’merely relative’, is asking you not to believe him. So don’t.
Roger Scruton, Modern Philosophy

presented by Christopher Chantrill

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