Caricature Will Only Keep Us From Fixing It
by
cornholio
10/06/2008, 6:40 PM #
The roots of our troubles come from both excessive and insufficient intervention by our government - bending our analyses to fit our ideologies will only hold us back from solutions.
When Barney Frank et al pushed the CRA, government erred by writing a blank check to subsidize those who could not otherwise afford home loans. It's not that some subsidies weren't a good idea, but they wound up committing public money without limits or even ways of measuring how much was committed. This alone combines excessive and insufficient government oversight.
The CRA may have started with good intentions, but it gave little thought to how its beneficiaries would use the mortgages it encouraged. It did not require, for example, lenders to show borrowers in simple terms what could happen to their payments when rates adjusted, or tell them about the history of interest rate fluctuations. Imagine if the government had handed out motorcycles without giving people helmets or even requiring a driver's test, or if the FDA didn't require pharmaceutical companies to list possible side effects of their drugs.
The lending standards intended to help disadvantaged home-buyers were then used to subsidize speculators and others beyond those the CRA was designed to help, and the securities based on subprime mortages were rated by agencies like Moody's, who were paid by bankers to pretend that these securities were safe. The conflicts of interest here should at least have been disclosed, and should probably be illegal.
It won't help to blame Frank as some sort of crazy Commie, or McCain as a heartless advocate of dog-eat-dog free market Capitalism. But it will help to tally the various causes and effects, and then to work systematically to fix what is mostly a sound system.
The clearest example of what is wrong came with the earmarks stuffed into the most recent bailout bill. To think that legislators would need to be bought off with $2 million dollars of earmarks before they would consider voting for a $700 billion emergency plan just beggars belief. Dems and Republicans are equally guilty of this kind of selfish behavior.
We don't have to understand all the financial intricacies to know that we need to fix campaign finance and the way we draw political districts. Let's leave partisan politics aside, clean up the mechanisms of government, and, whatever we call it, our evolving market system should get back on track.
