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The Sub-prime Blame Game

by Christopher Chantrill
March 11, 2007 at 5:24 pm

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THANK GOODNESS the Plame Game is over and Scooter Libby safely convicted for—what exactly was it? Now we can concentrate on the next Big Thing; the meltdown in the sub-prime mortgage market.

As a veteran broker commented: “Anyone could have seen that was coming.”

After “Bush Lied” it’s “liar loans.”

Even The New York Times has noticed. Gretchen Morgenson warned March 11, 2007 of trouble ahead in “Crisis Looms in Market for Mortgages.” On March 1, 2007, she advised, an “analyst at Bear Stearns wrote an upbeat report on a company [New Century Financial] that specializes in making mortgages to cash-poor homebuyers,” By Friday’s close, NEW had collapsed from $30.25 per share on February 1 to $3.21.

The only thing that is uncertain is just how President Bush is to blame for the whole thing. But never fear: the central skill of practical politics is to take the latest systemic government failure that “anyone could have seen was coming” and confidently blame it on the president.

In the current mortgage meltdown the president is clearly responsible for permitting the development of a “liar loan” market, the “stated income” mortgage loans in which the borrower merely states his/her income in a loan application without having to back it up with documentation.

The very idea! It violates the first principle of the welfare state that people are helpless and not to be trusted in the normal transactions of adult life. Mr. President, how could you allow innocent working families to lie themselves into foreclosure and bankruptcy?

It’s a pity that Mike Wallace is no longer the lion of the ambush interview that he was in his prime. “You mean to say,” he would have bellowed to a humble loan officer, “You mean to say that no check is made of an applicant’s income?”

There ought to be a law.

There ought to be a law about the ridiculous level of subsidy for home ownership: the mortgage interest deduction, the federally insured home loans, the government-sponsored enterprises like Fannie Mae and Freddie Mac that are issuing oceans of mortgage debt. All these government programs conspire to raise the price of housing above that which would obtain in an unhampered market for housing and mortgage loans. When events conspire to create a perfect storm, combining subsidy, environmentalist “smart growth” restrictions, and record low interest rates needed to stave off deflation after the NASDAQ crash, well, you could have seen it coming: a mega-boom followed by a bust.

There ought to be a law.

Bu let us look at the big picture. Let us look at the big things that we spend money on. There is housing, health care, education. Those are the big three. Then there is transportation, food, clothing, housewares, recreation, savings. Then there is taxes.

Notice anything? The big three--housing, health care, and education--are so important that the governing class feels a compelling need to supervise them in detail.

(Notice also that housing, health care and education are areas in which women instinctively focus their interest. Is that why the governing class is so interested in supervision? The little lady just can’t be trusted to act responsibly?)

The result is that the big three are completely screwed up. Health care is screwed up because its third-party payment scheme encourages people to treat health care as a free resource. Education is screwed up because it is a government monopoly and people are powerless to seek out an education adapted to the individual needs of their children. They must take what they are given. Unable to exercise choice in health and education directly people--that is to say, women--focus all their energies and resources on housing, bidding up the price of housing in areas with good schools. Government adds fuel to the fire by subsidizing everyone’s housing dollar.

The result, as Mark Steyn has written, is that average westerners have become adult teenagers, provided with pocket money to buy fancy houses, cars, and home electronics, but powerless to make the important decisions in their lives.

One fine day we are going to stumble upon the radical notion that people ought to pay for the necessaries of life with their own money and with the minimum of privilege, subsidy and government control. Progressive people will declare it to be a question of human rights. Practical people will declare it to be a matter of common sense. Readers of The New York Times will confidently pronounce at fashionable dinner parties that the policy mix of subsidy in housing, third-party payment in health care, and compulsion in education that obtained at the turn of the twenty-first century was a disaster waiting to happen.

Anyone could have seen it coming and it was all Bush’s fault.

Meanwhile you can expect that your average presidential candidate and your average White House reporter will suddenly become experts in the “liar loan” department.

Christopher Chantrill blogs at americanmanifestobook.blogspot.com.

Buy his Road to the Middle Class.

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Chappies

“But I saw a man yesterday who knows a fellow who had it from a chappie that said that Urquhart had been dipping himself a bit recklessly off the deep end.”  —Freddy Arbuthnot
Dorothy L. Sayers, Strong Poison

Hugo on Genius

“Tear down theory, poetic systems... No more rules, no more models... Genius conjures up rather than learns... ” —Victor Hugo
César Graña, Bohemian versus Bourgeois

Education

“We have met with families in which for weeks together, not an article of sustenance but potatoes had been used; yet for every child the hard-earned sum was provided to send them to school.”
E. G. West, Education and the State

Faith & Purpose

“When we began first to preach these things, the people appeared as awakened from the sleep of ages—they seemed to see for the first time that they were responsible beings...”
Finke, Stark, The Churching of America, 1776-1990

Conversion

“When we received Christ,” Phil added, “all of a sudden we now had a rule book to go by, and when we had problems the preacher was right there to give us the answers.”
James M. Ault, Jr., Spirit and Flesh

Postmodernism

A writer who says that there are no truths, or that all truth is ’merely relative’, is asking you not to believe him. So don’t.
Roger Scruton, Modern Philosophy

Faith and Politics

As far as the Catholic Church is concerned, the principal focus of her interventions in the public arena is the protection and promotion of the dignity of the person, and she is thereby consciously drawing particular attention to principles which are not negotiable... [1.] protection of life in all its stages, from the first moment of conception until natural death; [2.] recognition and promotion of the natural structure of the family... [3.] the protection of the right of parents to educate their children.
Pope Benedict XVI, Speech to European Peoples Party, 2006

China and Christianity

At first, we thought [the power of the West] was because you had more powerful guns than we had. Then we thought it was because you had the best political system. Next we focused on your economic system. But in the past twenty years, we have realized that the heart of your culture is your religion: Christianity.
David Aikman, Jesus in Beijing

Religion, Property, and Family

But the only religions that have survived are those which support property and the family. Thus the outlook for communism, which is both anti-property and anti-family, (and also anti-religion), is not promising.
F.A. Hayek, The Fatal Conceit

Conservatism

Conservatism is the philosophy of society. Its ethic is fraternity and its characteristic is authority — the non-coercive social persuasion which operates in a family or a community. It says ‘we should...’.
Danny Kruger, On Fraternity

US Life in 1842

Families helped each other putting up homes and barns. Together, they built churches, schools, and common civic buildings. They collaborated to build roads and bridges. They took pride in being free persons, independent, and self-reliant; but the texture of their lives was cooperative and fraternal.
Michael Novak, The Spirit of Democratic Capitalism

Society and State

For [the left] there is only the state and the individual, nothing in between. No family to rely on, no friend to depend on, no community to call on. No neighbourhood to grow in, no faith to share in, no charities to work in. No-one but the Minister, nowhere but Whitehall, no such thing as society - just them, and their laws, and their rules, and their arrogance.
David Cameron, Conference Speech 2008

presented by Christopher Chantrill

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