Tuesday, July 15, 2008



A couple of observations arise from two articles appearing in this morning’s (i.e., 7/15/08’s) Wall Street Journal:

Observation 1:

In an article on page A14, authored by John McKinnon and James Haggerty, discussing the sources and origins of Fannie and Freddie’s woes, the Journal highlighted the 1992 legislation that created the flaccid Office of Federal Housing Enterprise Oversight (“Ofheo”) and thus, ironically, gutted any effective oversight of Fannie and Freddie. (See my 1/17/08 post for my thoughts on the regulation of these mortgage beached whales.) The article quoted the apparently erudite Thomas Stanton, a Washington lawyer and longtime Fannie and Freddie critic, on Ofheo and the current Freddie and Fannie debacle:

“I don’t think anyone had any inkling that they (sic) were doing anything but good. People hadn’t really worked out what would happen.”

What Mr. Stanton said is profound not only for what it tells us about the current mortgage problems that the Democrats and the “free market” Bushmen are using as a lever to further socialize our financial system but also for what it says about government in general. People, even scrofulous poltroons we send to Washington, do not set out to do evil, or at least do not set out to do so explicitly. But there is in Washington, as there is throughout our land, a bad case of diarrhea of the heart (or gut) and constipation of the mind. People simply do not think: they do things that they guess will somehow be beneficent but they don’t, or simply do not have the intellectual horsepower or the inclination to overcome laziness necessary to think through the consequences of their actions.

It’s admirable to use one’s heart, but it’s necessary to use one’s brain.

Observation 2:

In a page A1 article describing Free Market Hank Paulson’s plans to bail out Fannie and Freddie, Deborah Solomon and James Reddy, the article’s authors, state:

“A Republican and free-market advocate, (Paulson) has become ad activist in the mold of Clinton Treasury Secretaries Lawrence Summers and Robert Rubin. Mr. Paulson has orchestrated an agreement among banks to back shaky mortgage securities, cajoled the mortgage industry to help those in danger of foreclosure and pushed hard for the deal that culminated with the sale of collapsing Bear Stearns Cos. to J.P. Morgan Chase & Co.”


To paraphrase Zay N. Smith, who writes the brilliant QT column in the Chicago Sun-Times, add free-market advocates to the list of things that aren’t’ what they used to be.

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