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To create the meme that the mortgage crisis was caused by some misguided affirmative action program led by Fannie Mae, the authors of Reckless Endangerment invented a slew of false "facts."

Read the following passage, written by Gretchen Morgenson and Joshua Rosner in Reckless Endangerment, and ask yourself whether the authors engage in race-baiting:

To push back against the encroachments of private lenders and the work of critics like [GSE Report], Fannie increasingly relied on its powerful and wealthy foundation to fund both offensive and defensive moves. Jim Johnson had started the practice at his replacement as chief executive, Franklin D. Raines, knew better than to stop it.

In May 2003, for example, housing activists at ACORN issued a press release for accusing Wells Fargo, one of the nation's largest banks, of predatory lending. Staging demonstrations of several high-profile locations across the country, ACORN's actions seemed coordinated with the help of Fannie and Freddie. Just before these demonstrations, ACORN had organized picketers in front of the homes of executives at Household International, another private lender that competed with the government-sponsored enterprises.

These were mere skirmishes in the on-again off-again war between the banks that underwrote mortgages and Fannie and Freddie, which financed them.

What ACORN "Seemed" To Be Doing

So "ACORN's actions seemed coordinated with the help of Fannie and Freddie,"  but based on what? What facts indicate that ACORN's actions are an example of indirect efforts by Fannie to limit competition or push back against critics? What facts are presented to suggest that ACORN had anything whatsoever to do with Fannie? What facts show that criticism of Wells' and Household's predatory lending practices constituted any kind of pushback by Fannie against its critics? Absolutely nothing. But facts are not going to get in the way of the authors' agenda.

This is how rightwing hacks pervert history, as noted earlier, here. First, they invent a bogus "fact," in this case the imaginary coordination between ACORN and Fannie. Second, they use the bogus fact as the predicate for inventing a bogus trend, in this case the unfounded claim that Fannie and Freddie were engaged in a stealth campaign to stifle competition and honest debate. And in so doing, they malign ACORN's honest efforts to curb illegality at Wells and Household.

Was there any reason to believe that the accusations against Wells Fargo and Household International were unfounded? Or unfair? Or overblown? Not according to government officials in Tennessee, Maryland, Illinois, Pennsylvania, the Justice Department, reporting in The New York Timesor elsewhere. Not according to Eliot Spitzer.  The evidence of widespread criminality at both of these companies is pretty overwhelming.  

But with zero evidence, Morgenson and Rosner pull out the stops to insinuate that ACORN, an organization devoted to protecting minorities and the poor, pursued some hidden agenda, to limit competition in the mortgage market. This is another red herring.  HUD regulations prevented the GSEs from financing loans with predatory attributes, which were the bread and butter of subprime lending at Wells and Household international. The GSEs were specifically forbidden from including "B&C," loans, (i.e. subprime loans) to meet their affordable housing goals. And Fannie and Freddie's business model, financing mortgages as a buy-and-hold proposition, was starkly different from the originate-to-distribute model used by Wells and Household.

But if you read the passage quickly, you might not notice that the authors constructed their narrative out of nothing.  Were they race-baiting? I'd be inclined to give the authors the benefit of the doubt, were it not for all the other lies and distortions in the book.

Substituting Maxine Waters For George Bush

One reason that progressives reviewed the book favorably was that they were unfamiliar with the standard paint-by-number template used by other conservative hacks. If you want a condensed Readers Digest version of the Reckless Endangerment, read the passage about Fannie in Charles Gasparino's The Sellout, or Chapter 11 of Michelle Caruso-Cabrera's You Know I'm Right.

However, these authors showed some limited respect for fact-checking. Caruso-Cabrera writes:

Down payments? We don't need any down payments. They were practically giving money away at this point. [In 2003] Bush asked Congress to find a program that would help low income homeowners receive a $10,000 or 6% of the purchase price, whichever was greater, to cover down payments, closing costs and even renovation. In his speech announcing the American Dream Down Payment Initiative, as it was called, [Bush] said, and "I'm proud to report that Fannie Mae has heard the call."
The “American Dream Down Payment Initiative,” H.R. 1276, was a Republican effort, sponsored by Rep. Kathryn Harris, with few Democratic co-sponsors. (Maxine Waters was not one of them.) Caruso-Carbrera engages in the standard rightwing ploy, which takes a small inconsequential pilot program that would have no impact on the broader mortgage markets, as proof that the government assistance opened the floodgates to bad lending across the board. Somehow, she twisted a program to provide $10,000 in down payment assistance into, "Down payments? We don't need any down payments." The program's annual funding was $75 million dollars, a drop in the ocean of mortgage originations, which exceeded $2 trillion a year.  Again, the bogus "fact," is used to justify the bogus trend, that government policy opened the floodgates to zero down payment loans.

But Reckless Endangerment went further:

[Rep. Maxine] Waters's "American Dream Down Payment Initiative," would free a borrower from having to put any money down when buying a house. Never mind that history showed borrowers who had no investment in their homes defaulted far more frequently than those who had built up equity in them.
So suddenly President Bush morphed into a black congresswoman, and government assistance, which was no more than 6% of a home's purchase price, morphed into a policy of zero down payments. As for the bogus trend:
Waters’ plea was music to [Countrywide CEO Angelo] Mozilo's ears. Although her initiative would never get off the ground, within two years Countrywide would be writing no-money-down mortgages with abandon.
Somehow, a Democrat's "initiative would never get off the ground" was "music to Mozilo's ears." But based on what? Back in 2003, Countrywide was a non-bank lender, exempt from oversight by any federal regulators. And Angelo Mozilo, whose company was a major contributor to Republican causes, knew that Republicans, not Democrats, controlled the House and the White House. Once again, the bogus "fact" supports the bogus trend.

Do you believe that all this revisionism was some kind of innocent accident, that anyone, even a reporter at The New York Times, would make? But wait, there's more.

Falsifying A Boston Fed Study On Minority Lending

"The Boston Fed was making a fool of itself on the subject of home-mortgage discrimination," write Morgenson and Rosner, referring to a 1992 study about discrimination against minorities in Boston. More specifically:

In October 1992, “Mortgage Lending in Boston: Interpreting HMDA Data” was published by the Boston Fed… Although the title was dull and the writing dry, its conclusions were explosive.

Racial bias by mortgage lenders [Boston Fed economist Alicia] Munnell and her colleagues wrote, not only existed, it was pervasive. HMDA data showed that black and Hispanic loan applicants were for far more likely to be rejected by banks than whites. The rejection ratio for minorities was 2.8 to 1 compared with white applicants.

There was only one problem. The methods used by the Boston Fed researchers to prepare the report were flawed, according to a throng of critics in it out of academia, who questioned the paper’s findings the following year. Its claims a bias we're by no means proved, these people contended. The analysis did not consider whether an applicant met the lenders’ credit guidelines, one researcher noted, while others pointed out that the type of model used by the Boston Fed oversimplified the complex mortgage lending process.
Forbes magazine was one up among the few media outlets to question the study's findings. For an article published on January 3, 1993, staffers Peter Brimelow and Leslie Spencer interviewed Munnell, who revealed yet another problem with the analysis. Munnell told Forbes that in preparing the study, Fed researchers looked at default rates o'clock across census tracts and found that minorities do not tend to fail more often on their loans to whites.

OK, now the truth. The actual study was far more sophisticated than Morgenson and Rosner insinuate, which is why the racial disparity was never 2.8 to 1. From the text of the report:
The results of this study indicate that minority applicants, on average, do have greater debt burdens, higher loan-to-value ratios, and weaker credit histories and they are less likely to buy single-family homes than white applicants, and that these disadvantages do account for a large portion of the difference in denial rates. Including the additional information on applicant and property characteristics reduces the disparity between minority and white denials from the originally reported ratio of 2.7 to 1 to roughly 1.6 to 1.
The mortgage application and approval procedure is complex and far from mechanical. It generally consists of three steps - a quick review of the application for viability, verification of the information and an appraisal of the property, and an evaluation of the numbers and consideration of any "compensating factors."
So, contrary to the book's dissembling about a failure to, "consider whether an applicant met the lenders’ credit guidelines," or about the the Boston Fed oversimplifying the the complex mortgage lending process, the actual study considered these issue in depth. And it withstood considerable scrutiny. Writing in The New York Review of Books, Frank Partnoy and Jeff Madrick write:
[Morgenson and Rosner] don’t point out that the Boston Fed’s study was later subject to a stringent peer-review process and was published in 1996 in the respected American Economic Review. Indeed, few research papers have been as closely scrutinized. The published results, which corrected some methodological errors, showed persuasively that there was in fact a bias in the mortgage markets. In 1998, another peer-reviewed paper—also ignored by the authors—analyzed the criticisms of the Boston Fed study, as well as other research on mortgage bias, and concluded that the study was fundamentally correct. “The bottom line is that the results related to race are extremely robust,” wrote the author.

Also you won’t find names Brimelow or Spencer in the book’s index, for obvious reasons. Peter Brimelow is one of America’s most preeminent White Nationalists. As for the Forbes criticism--here we may be delving into distinctions far too subtle for Morgenson and Rosner--the issue of mortgage default rates is somewhat off topic. The Boston Fed study addressed a threshold question, whether or not someone’s mortgage application is denied.  The issue of whether minorities attain mortgages when banks apply more stringent credit standards is a different, albeit related, question. And since minorities do not necessarily live in minority neighborhoods, Brimelow's observations did not refute the study's findings. Also, as Prof. John Yinger of Syracuse University has pointed out:

The most fundamental problem with this argument is that it confuses averages and margins. The default rate for a group of borrowers is an average that reflects the entire distribution of credit characteristics for those borrowers—not just the characteristics of the least creditworthy borrowers in that group.
Brimelow still posts the article on his White Nationalist website, and you can judge for yourself if you suspect that his reporting was slanted.

And once again, the bogus "fact" serves as the predicate for the bogus trend:

[Munnell said,] “It was not that they were doing bad things to black people, they were doing nice things for white people so when you look at it statistically, right race becomes a factor. We were never arguing that you should give loans to people who don't qualify.”

Still, that was the result.

And what, if any, facts demonstrate that result? Nothing. More on that later.

If You Don't Like A Study's Conclusion: Invent a Different One

When “A Study of the GSEs’ Single-Family Underwriting Guidelines,” was published by the Urban Institute jn April 1999, the report issued a disclaimer up front:

The study's results rely heavily on the third source, the perceptions and opinions of national and local key informants. Thus, the results presented here should be interpreted with care, since the opinions and perceptions of the informants may not be representative of all individuals who work with the GSEs' guidelines.
With that important caveat, the study noted that, according to these informants, the GSE's tougher credit guidelines tended to exclude minority applicants:
Informants did express concerns about some of the GSEs' practices. The GSEs' guidelines, designed to identify creditworthy applicants, are more likely to disqualify borrowers with low incomes, limited wealth, and poor credit histories; applicants with these characteristics are disproportionately minorities. Informants said that some local and regional lenders serve a greater number of creditworthy low- to moderate-income and minority borrowers than the GSEs, using loan products with more flexible underwriting guidelines than those allowed by Fannie Mae or Freddie Mac.
But the authors of the study made it clear that they were not persuaded by this anecdotal feedback:
This raises the possibility that the GSEs' current guidelines may have a disparate impact on minority borrowers if the guidelines have disproportionate effects on minority borrowers but do not serve a business necessity by accurately predicting loan performance. However, none of the informants provided the evidence necessary to confirm this possibility. A disparate impact finding would have to be based on a detailed analysis of the relationship between underwriting guidelines and loan performance, but none of the informants presented any specific empirical data about the performance of loans issued with underwriting guidelines more flexible than the GSEs'.
Consequently, 'in order for HUD to systematically address the concerns raised by the informants," the study's key recommendation was for HUD to, "develop an enhanced loan-level database."

None of this supported the Morgenson/Rosner agenda, so they lied. Morgenson/Rosner took the informants' anecdotal feedback and presented it as the conclusion drawn by the authors of the study. They write:

The authors nevertheless concluded that Fannie and Freddie were not doing enough for low-income borrowers.

"The GSEs' guidelines, designed to identify creditworthy applicants, are more likely to disqualify borrowers with low incomes, limited wealth, and poor credit histories; applicants with these characteristics are disproportionately minorities,” the study said. [Here the study was relaying what the informants said, not what the study concluded.]  “Informants said that some local and regional lenders serve a greater number of creditworthy low- to moderate-income and minority borrowers than the GSEs, using loan products with more flexible underwriting guidelines than those allowed by Fannie Mae or Freddie Mac.”

The message was clear: Fannie and Freddie’s underwriting standards were too high; low-income originations were too low.

And, Morgenson/Rosner insinuate that the authors of the study came up with this phony "conclusion" because they were on the take from Fannie Mae:
Of the four authors on the report, three had extensive ties to Fannie Mae: [Kenneth] Temkin, [George] Galster, [Roberto] Quercia. Galster was a consultant to the company and all three had been on the receiving end of research money from the Fannie Mae Foundation.
At the risk of being didactic, note the rightwing technique first identified here: The bogus "fact," is used as a pretext to slime  others. And the bogus "fact," is used as a predicate for the bogus trend:
The report, like the questions Boston Fed study before it, made political waves, upping the pressure on Fannie and Freddie to lower the stnadards of mortgages they would buy.
Is there a pattern here? So let's recap.

First, the authors invent some kind of coordinated effort, between ACORN, an organization devoted to protecting minorities against various abuses, and Fannie Mae. And this invented coordination is used to justify the unsubstantiated claims that Fannie used ACORN to limit competition in the mortgage markets, and that ACORN's opposition to predatory lending was less than legitimate.

Second, the authors cite a small, inconsequential $75 million program, the American Dream Down Payment Initiative, as a spark that triggered an explosion of no-down payment loans. But since an inconvenient fact--the legislation was initiated and sponsored by Republicans--interfered with the Morgenson/Rosner agenda, they substituted an African American woman for the actual GOP sponsors.

Third, a 1992 Boston Fed study tentatively found some statistical evidence of disparate treatment for mortgage applications by minorities. To slime the study, Morgenson/Rosner mischaracterize the study and cite a Forbes article, by a White Nationalist, as proof that, "the Boston Fed embarrassed itself."  And with no supporting facts, Morgenson/Rosner assert that the study led to the practice of extending mortgages to unqualified borrowers.

Fourth, Morgenson/Rosner falsify the conclusions of an Urban Institute Study about GSE lending to minorities, in order to slime the study's authors, by claiming that their work product was tainted by affiliations to Fannie Mae. And then they cite the falsified conclusions to make the false claim that the GSEs responded by lowering their credit standards.

Any other false and misleading claims made in the book? We've only just begun.

Wed Jun 13, 2012 at 4:59 AM PT: Today, yet another story in the Washington Post, "Ex-loan officer claims Wells Fargo targeted black communities for shoddy loans," which once again vindicates ACORN's position and illustrates why the book's claim, that ACORN was acting in tandem with Fannie, seems ever more specious.

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Comment Preferences

  •  Thanks for posting this. (1+ / 0-)
    Recommended by:
    Times Truth Teller

    I had missed it and it needs to be pointed out as this meme is being pushed hard again by those that benefit from racial politics.  It is even being pushed in Europe now (using the poor/disenfranchises in place of race based although nationality is being included as well) and as the past tells us, that does not ever end well. Let's push back on this before it gains traction again.

    ~War is Peace~Freedom is Slavery~Ignorance is Strength~ George Orwell "1984"

    by Kristina40 on Tue Jun 12, 2012 at 11:25:14 AM PDT

  •  You're back with attacks on Gretchen (2+ / 0-)
    Recommended by:
    VetGrl, Bob Duck

    Look, if you thoroughly read her articles, what you take away from it is the fact that Republicans and Congress strong-armed Fannie Mae and corrupted the internal controls for underwriting and guaranteeing loans.

    I need to find a great article that Gretchen wrote on this meltdown and the fact that Fannie Mae was squeezed on one end by the deceptive marketplace created by Countrywide and its ilk and squeezed on the other end by members of Congress to underwrite the risky loans without proper appraisal controls or underwriting.

    Countrywide and the Too Big Too Fail boys, as well as greedy members of Congress, basically told Fannie Mae regulators to either shit or get off of the pot. And get the hell out of the private Big Boys' domain.

    So Fannie Mae knuckled under so they could stay in the game of providing mortgages to average Americans.

    Gretchen has consistently laid the blame for much of the housing bubble meltdown at the door of Congress where it belongs.

    That is NOT to say that Gretchen hasn't raked Fannie Mae and its network and regulators over the coals for their gutless failures.

    So far, the taxpayers have shelled out $154 billion to cover losses at Fannie and  Freddie. That number may well go higher and it is impossible to say now what the final taxpayer tally will be. Remember, that throughout the 1990s and 2000s when Fannie Mae and Freddie Mac were enlarging their operations, ballooning their balance sheets with increasingly dubious mortgages, and enriching their executives, insiders and many members of Congress who supported them assured us that the companies would never cost the taxpayers a dime.
    Gretchen writes on the updates for the fallout of the housing crash:
    Since the taxpayers took over Fannie and Freddie, the companies have worked hard to reduce the risks in the mortgages they purchase or guarantee. For example, they will only buy or back mortgages taken out by borrowers with relatively high credit scores and they require documentation of borrower incomes and other attributes. The years of backing reckless loans are pretty much over.

    But Congress did not address a resolution of Fannie and Freddie in Dodd-Frank so the potential for problems remains. It would be ideal if we, as a nation, could have an honest dialogue about housing policy. If a high rate of homeownership is a goal that the country wants to achieve, then we really should discuss how to achieve it without creating enormous losses for taxpayers. It does seem that one of the lessons from this episode is that a higher rate of homeownership should be a direct on-balance sheet expense to the government, not achieved through quasi-private, government enterprises whose executives extract a large portion of the implied government subsidies while delivering on their government mandates.

    Loan Servicing companies (that worked for Fannie Mae) and MERS routinely filed false documents and "played fast and loose with the law."

    Gretchen has been at the forefront to delve into the backrooms and the systemic failure of our housing market.

    The inspector general said that both Fannie Mae and its regulator appear to have ignored other signs of problems in their foreclosure operations. For example, the Federal Housing Finance Agency did not respond to borrower complaints about improper actions taken by law firms in foreclosures received as early as August 2009, even though foreclosure abuse poses operational and financial risks to Fannie Mae.

    The report cited a media report from early 2008 detailing foreclosure abuses by law firms doing work for Fannie Mae.

    Nevertheless, a few months later and just before its takeover by the government, Fannie Mae began requiring the banks that serviced its loans to use only those law firms that were in its network. By then, 140 law firms in 31 jurisdictions were in the group. Among the largest firms in the network was the David J. Stern firm in Plantation, Fla., which was handling more than 75,000 foreclosure actions a year before Fannie Mae terminated it because of vast problems with its legal work.

    In my honor he pulled out old forgotten dignity and walked straight in a crooked world. ~~poetry of young Barack Obama

    by bronte17 on Tue Jun 12, 2012 at 12:14:58 PM PDT

    •  I've read most of Morgenstern's articles, and (0+ / 0-)

      analyses of many of them by Yves Smith at Naked Capitalism.  While your comment is interesting, you really aren't addressing THIS piece.  Where did she get her 'facts' that are being refuted here?  How did she come to THESE conclusions?


      Conservatism is a function of age - Rousseau
      I've been 19 longer'n you've been alive - me

      by watercarrier4diogenes on Tue Jun 12, 2012 at 12:57:28 PM PDT

      [ Parent ]

      •  Yeah... my internet connection is fubar this pm (0+ / 0-)

        when I first started responding to this diary.

        I just put a bunch of somewhat salient points up while I could still connect.

        Will have to find the time... and it's going to take some serious time spent... to break this down and figure out what the angle is behind this continued attack upon Gretchen Morgenson.

        I thought it may have been an article coming out soon, but it may be something contained with her book so someone intends to disparage the book from the git-go.

        In my honor he pulled out old forgotten dignity and walked straight in a crooked world. ~~poetry of young Barack Obama

        by bronte17 on Tue Jun 12, 2012 at 01:04:42 PM PDT

        [ Parent ]

    •  That's a lot of dissembling to unpack... (0+ / 0-)

      I'll start with the obvious stuff:

      Credit underwriting standards and foreclosure fraud are two very different things. Yes, Fannie's wilfull blindness to foreclosure fraud performed by others in its name is unconscionable by any standard. And kudos to Morgenson and anyone else who draws attention to this ongoing abuse of millions of homeowners and to the MERS' assault on the rule of law. But that's irrelevant to what I was writing about.

      Also, and I should have made this clearer. The New York Times has very rigorous standards for fact checking, which Morgenson completely disregarded when she wrote this book. I think that's one reason why reviewers, assuming a false equivalency between the book and the newspaper, gave her the benefit of the doubt. But once you attempt to verify the book's claims, it's jawdropping how deceitful the authors were.

      Reckless Endangerment was not about foreclosure fraud or servicer abuses. It was about credit underwriting, imprudent loans extended by Fannie and Freddie. And here, we see how Morgenson and Rosner falsely assert that the GSEs'  standards were compromised by some misguided notion of racial fairness. They offer nothing--zero--to back up their claims, and often dissemble wildly. They are slick, which is why their smoke-and-mirrors arguments seem plausible if you are unfamiliar with the subject.

      So let's go through the problems with the first two passages you quote:

      "So far, the taxpayers have shelled out $154 billion to cover losses at Fannie and  Freddie. That number may well go higher and it is impossible to say now what the final taxpayer tally will be."

      More than a little misleading. The FHFA, which has noted that, so far, the GSE's financial projections have proved to be quite accurate, projects that on a net cash basis, the GSEs are not expected to need any additional financial support from the government. When rightwingers speak of additional government support, they ignore the 10% cash dividends paid out by the GSEs to the government.
      Morgenson's sentence is almost all insinuation and very little fact.

      As for the rest, Morgenson's bloviations remind me of the sports writer who spends thousands of words excoriating Steinbrenner but never takes a look at the Major League Tables.  She writes that, "throughout the 1990s and 2000s when Fannie Mae and Freddie Mac were enlarging their operations, ballooning their balance sheets with increasingly dubious mortgages."

      Any evidence to back up her claim? Does she ever even consider loan performance data throughout the 1990s and 2000s? Does she compare the GSEs' loan performance with the rest of the mortgage market? Never, because then it becomes apparent that she had no idea what she was writing about.

      It's not like this data is hard to find. Play around with the FHFA website and you'll quickly find the Annual report to Congress.
      On page 124 you see that for Fannie, from 1990 through 2007 annual credit losses on the mortgage book ranged between 1 and 6 basis points. Serious delinquency rates on single family mortgages were always well below 1%. So where does she get off claiming that from the 1990s onward, Fannie's mortgages were "increasingly dubious"?

      After the worst housing crash since the Great Depression, the only vintages of loans that proved to be unprofitable for Fannie were those extended dring the hight of the bubble, from 2005 through 2008. Even if Fannie used the most conservative standards to finance loans in Arizona or California or Nevada in 2006, it would still incur losses from underwater mortgages.

      Which brings us back to the major league tables. If you compare loan performance at the GSEs to any other segment or lender, the GSEs are several times superior. Don't take my word for it, again, go to the FHFA to see for yourself.

      So let's be clear, any claim that the GSEs' credit standards were in any way worse than the rest of the market is a big fat lie.  There's plenty more. The GSEs hold the majority of loans in the US, but the majority of nonperforming loans are held by non-GSE numbers. Bank of America incurred larger losses on mortgages than Fannie Mae.

      The GSEs did not by CDOs, credit default swaps, or loans with predatory attributes. Which is why this rightwing sliming of Dodd-Frank, which suggests that Congress missed the boat by not "reforming" the GSEs when it went after derivative abusers, is so much smoke.

      Sorry bonte17, but the empress has no clothes.

      •  With a background in real estate and grad work (0+ / 0-)

        in international finance/econ... I am well aware of the underlying dynamics of this issue. And you are missing some critical components in your analysis. It will trip up where you land.

        What I haven't looked at in detail are your accusations of this "misguided notion of racial fairness." It is a loaded charge as you well know.

        And quite frankly, with my deadlines for the next month... time is a commodity that can't be given up for this. At this moment.

        But, I do have this bookmarked and will keep an eye on your diaries so as to better gauge your intentions with this series against Gretchen.

        In my honor he pulled out old forgotten dignity and walked straight in a crooked world. ~~poetry of young Barack Obama

        by bronte17 on Tue Jun 12, 2012 at 04:42:58 PM PDT

        [ Parent ]

  •  I looked at the other side of this... (0+ / 0-) my (fiction) book:
    (Another impromptu Tea Party gathering in the coffee shop, where poor folks are blamed for the housing crisis, the 'free market' is invoked yet again, and Seth, my protagonist, can't take it any more):

    "…do you really believe the market will solve all our problems?  What the fuck does that even mean?  First of all, the marketplace is what made the banks froth up and just approve everybody.  You think they made those loans for free?  Pro-bono?  Outta the goodness of their bleeding fucking hearts?  You know how many executives made fortunes just along that chain, that one little slice of an industry?  One fucking tiny tranche?’  I wasn’t waiting for an answer.  ‘One bank competes against another, and one makes the loans and makes a nice short-term profit, and so their competitor does the same, and so on and so on…and thus, our great American marketplace, with all its competition, drove the process into a frenzy.’  Rom tried to cut in, but, I continued quickly, ‘And they all got paid, though, and so the good news is they spent their middle class money and upper middle class money in their local stores, and that kept-’
    ‘-Oh shut the fuck up about your fucking multiplier bullshit again!  Here, Seth, lemme buy a cup of coffee and save the U.S. economy!  Here, take my 75cents, lemme buy a donut so I can save the world!  I’m fucking Superman!!!’  Rom finally got in a wedge-word, and now he wasn’t going to stop spewing.  ‘You and your elitist goddamned multiplier!!!'  "

    Aldus Shrugged : The antidote to Ayn Rand.

    by Floyd Blue on Tue Jun 12, 2012 at 12:43:00 PM PDT

    •  I always figured... (0+ / 0-)

      ....the multiplier is like climate change.  The repubs and tea guzzlers simply don't believe in it.  (Forget the fact that it is fact.)

      Hearing the GOP response to Pelosi talking about how unemployment comp actually spurs the economy through the multiplier effect (ie:  the non-rich actually spend every bit of their money in their local stores), made me sick to my stomach.

      Aldus Shrugged : The antidote to Ayn Rand.

      by Floyd Blue on Tue Jun 12, 2012 at 12:46:57 PM PDT

      [ Parent ]

  •  The most commonly referenced straw man concerning (1+ / 0-)
    Recommended by:
    Times Truth Teller

    Fannie and Freddie and affirmative action being responsible for the entire mortgage meltdown usually involves invoking Acorn, Fannie and Freddie, Barney Frank and most importantly, the Community Re-investment Act (of 1977!). All commentary I have read along these lines invariably contains an element of subtle or not so subtle race baiting, usually with the requisite coy sentence about  "making loans to people who didn't 'deserve'  them".

    I've read more than I care to think about in terms of the housing crisis and the resultant foreclosure fraud. The GSE's were very very late to the sub-prime dance and were basically forced into it when they saw themselves losing market share. They were involved in approximately 1/5 of the loans that went south, leaving 4/5 at the doorsteps of others, yet they have always been the favorite scapegoat and whipping boy - much nicer to blame things on liberal groups and Barney Frank than the actual real bad actors that were driving the entire bubble.

    I think the diarist makes compelling points regarding the
    reporting of Morgenson that are quoted in this diary. I wonder how she would respond?

    While at one time I revered the NYT, the whole Judith Miller thing caused me to rethink my ranking system. I feel like I get a lot more information on economics by reading nakedcapitalism and zero hedge and then seeing how much filters through to MSM. Firedoglake and nakedcapitalism and 4closurefraud all did reporting and analysis on foreclosure fraud  that completely and totally eclipsed any offered up by the mainstream.

    “Human kindness has never weakened the stamina or softened the fiber of a free people. A nation does not have to be cruel to be tough.” FDR

    by Phoebe Loosinhouse on Tue Jun 12, 2012 at 01:28:27 PM PDT

  •  Gretchen Morgenson (1+ / 0-)
    Recommended by:
    Bob Duck

    Gretchen Morgenson is one of the best business journalists there is, and a well-regarded New York Times reporter.  The biggest threat to the Wall Street Journal is the New York Time's strong business reporting.

    That doesn't mean she isn't wrong.  From time to time, she absolutely will be.

    But no one with a balanced view is going to regard her as a right-wing hack.

    •  Agreed. (0+ / 0-)

      IMHO, it is quite inappropriate to refer to Gretchen as a "right-wing" hack.

      "When fascism comes to America it will be wrapped in the flag and carrying a cross." - Sinclair Lewis

      by Bob Duck on Tue Jun 12, 2012 at 02:47:12 PM PDT

      [ Parent ]

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