In June this year after the US Women’s Soccer team eliminated the North Koreans from the World Cup, we learned the truth about their loss. Apparently several of the players were a little off their game due to the fact that they had been “struck by lightning”.
Silly. But no less so than the revelation that Dear Leader, Kim Jung Il uses an invisible phone, which he developed himself, to give the North Korean coach tactical advice during matches.
You have to wonder whether the Orwellian lies are for his own prisoner population or whether he thinks the free world might be persuaded. After all, the well balanced media admit there is really no way for them to know if any of this is true. You can however be sure that everything Dick Cheney says is not true.
There is something of the same Orwellian dishonesty about the governments lawsuit against 17 financial institutions who sold mortgages to Fannie Mae and Freddie Mac.
To begin with there is the question of who the charade is for. All you neighbors knew 5 years ago it didn’t make sense that a guy with no provable income could get a 95% loan on a $500,000 house at historically low-interest rates. Politicians have for years defended the unworkable business model and resulting losses at Fannie and Freddie as a necessary communitarian sacrifice to achieve the goal of wider home-ownership. Not just any home either but more home than we could afford. Because that’s a right.
For just as long, Bankers have decried the erosion in underwriting standards driven by what amounted to distortion of a private market based on government interference.
If the politicians understood the game and the people buying the homes understood the game and the executives at Fannie and Freddie understood the game who is culpable?
Let’s accept the premise that Fannie and Freddie were really just naive and didn’t realize they weren’t getting an adequate risk premium on these securities. The turn on these loans is something far short of the decade or so they were creating this market. Are we to understand that there are no internal controls, no reporting or analysis that revealed any difference between the performance of these loans and conforming loans until the bubble burst and the fiction was laid bare?
No, the truth is that Politicians like Barney Frank and Chris Dodd created a situation where the financial institutions were essentially forced to play along. The banks made lots of money on the deal but that doesn’t make them the bad actors. They acted rationally to maximize the interests of their shareholders in a false market created and maintained against significant opposition over a long period of time. Everyone involved knew exactly how this worked and they knew that if the housing market ever softened, as it always does, the house of cards would collapse.
Our media is mostly still skeptical when they hear Kim Jong Il type stories about how Al gore invented the internet or Barrack Obama scheduled his address to Congress on evening of the Republican debate by pure coincidence but the lie has to be frivolous. As long as the lie supports the social justice agenda to which they are sympathetic their child like naiveté persists. The housing crisis is what the noble, soaring rhetoric of social justice looks like in practice.
Liberals object to the idea that regulatory uncertainty stymies business. This lawsuit makes it seem that ex post facto, the government can do whatever they want. The Dodd Frank Financial legislation goes a long way towards cementing that kind of uncertainty into law.
The media may like the idea of the big banks becoming the targets of a capricious legal assault. If they quit gazing at themselves in the mirror long enough to look around they would see examples of where that kind of caprice leads. Just ask Oleg Kashin.
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