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April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review July 3, 2011/ 1 Tamuz, 5771

Burning down the house

By George Will



http://www.JewishWorldReview.com | “The louder he talked of his honor, the faster we counted our spoons.”

Emerson

The louder they talked about the disadvantaged, the more money they made. And the more the financial system tottered.

Who were they? Most explanations of the financial calamity have been indecipherable to people not fluent in the language of “credit default swaps” and “collateralized debt obligations.” The calamity has lacked human faces. No more.

Put on asbestos mittens and pick up “Reckless Endangerment,” the scalding new book by Gretchen Morgenson, a New York Times columnist, and Joshua Rosner, a housing finance expert. (Buy it at a 44% discount by clicking here.) They will introduce you to James A. Johnson, an emblem of the administrative state that liberals admire.

The book’s subtitle could be: “Cry ‘Compassion’ and Let Slip the Dogs of Cupidity.” Or: “How James Johnson and Others (Mostly Democrats) Made the Great Recession.” The book is another cautionary tale about government’s terrifying self-confidence. It is, the authors say, “a story of what happens when Washington decides, in its infinite wisdom, that every living, breathing citizen should own a home.”

The 1977 Community Reinvestment Act pressured banks to relax lending standards to dispense mortgages more broadly across communities. In 1992, the Federal Reserve Bank of Boston purported to identify racial discrimination in the application of traditional lending standards to those, Morgenson and Rosner write, “whose incomes, assets, or abilities to pay fell far below the traditional homeowner spectrum.”

In 1994, Bill Clinton proposed increasing homeownership through a “partnership” between government and the private sector, principally orchestrated by Fannie Mae, a “government-sponsored enterprise” (GSE). It became a perfect specimen of what such “partnerships” (e.g., General Motors) usually involve: Profits are private, losses are socialized.

There was a torrent of compassion-speak: “Special care should be taken to ensure that standards are appropriate to the economic culture of urban, lower-
income, and nontraditional consumers.” “Lack of credit history should not be seen as a negative factor.” Government having decided to dictate behavior that markets discouraged, the traditional relationship between borrowers and lenders was revised. Lenders promoted reckless borrowing, knowing they could off­load risk to purchasers of bundled loans, and especially to Fannie Mae. In 1994, subprime lending was $40 billion. In 1995, almost one in five mortgages was subprime. Four years later such lending totaled $160 billion.

As housing prices soared, many giddy owners stopped thinking of homes as retirement wealth and started using them as sources of equity loans — up to $800 billion a year. This fueled incontinent consumption.

Under Johnson, an important Democratic operative, Fannie Mae became, Morgenson and Rosner say, “the largest and most powerful financial institution in the world.” Its power derived from the unstated certainty that the government would be ultimately liable for Fannie’s obligations. This assumption and other perquisites were subsidies to Fannie Mae and Freddie Mac worth an estimated $7 billion a year. They retained about a third of this.



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Morgenson and Rosner report that in 1998, when Fannie Mae’s lending hit $1 trillion, its top officials began manipulating the company’s results to generate bonuses for themselves. That year Johnson’s $1.9 million bonus brought his compensation to $21 million. In nine years, Johnson received $100 million.

Fannie Mae’s political machine dispensed campaign contributions, gave jobs to friends and relatives of legislators, hired armies of lobbyists (even paying lobbyists not to lobby against it), paid academics who wrote papers validating the homeownership mania, and spread “charitable” contributions to housing advocates across the congressional map.

By 2003, the government was involved in financing almost half — $3.4 trillion — of the home-loan market. Not coincidentally, by the summer of 2005, almost 40 percent of new subprime loans were for amounts larger than the value of the properties.

Morgenson and Rosner find few heroes, but two are Marvin Phaup and June O’Neill. These “digit-heads” and “pencil brains” (a Fannie Mae spokesman’s idea of argument) with the Congressional Budget Office resisted Fannie Mae pressure to kill a report critical of the institution.

“Reckless Endangerment” is a study of contemporary Washington, where showing “compassion” with other people’s money pays off in the currency of political power, and currency. Although Johnson left Fannie Mae years before his handiwork helped produce the 2008 bonfire of wealth, he may be more responsible for the debacle and its still-mounting devastations — of families, endowments, etc. — than any other individual. If so, he may be more culpable for the peacetime destruction of more wealth than any individual in history.

Morgenson and Rosner report. You decide.

(Buy "Reckless Endangerment" at a 44% discount by clicking here.)

Every weekday JewishWorldReview.com publishes what many in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here.

George Will's latest book is "With a Happy Eye but: America and the World, 1997-2002" to purchase a copy, click here. Comment on this column by clicking here.

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