Subprime mortgage catastrophe

by Walter Olson on September 16, 2008

The Andrew Cuomo (as HUD secretary) connection (Wayne Barrett, “Andrew Cuomo and Fannie and Freddie”, Village Voice, Aug. 5)(via Bader, who has much more). I have more on the credit crisis here, here, and here at Point of Law.

Related: Jack Shafer has a bipartisan list of Fannie Mae friends.

{ 9 comments }

1 Nicolas Martin 09.16.08 at 2:11 pm

Now Walter Olson is helping to perpetuate the myth that deregulation precipitated the meltdown? For shame.

2 OBQuiet 09.16.08 at 2:36 pm

I fail to see any mention of deregulation in any of this. If anything, it looks to me like the articles place the blame on the regulators pushing things outside the normal market limits.

3 Todd Rogers 09.16.08 at 3:32 pm

I agree with OBQ. Mr. Martin, would you kindly add some support to your point?

4 Nicolas Martin 09.16.08 at 3:52 pm

The evil of deregulation is, of course, the very point of the article in the socialist Village Voice. Here’s a quote from the linked piece:

“Those are the interests that surrounded Cuomo, who did more to set these forces of unregulated expansion in motion than any other secretary and then boasted about it, presenting his initiatives as crusades for racial and social justice.”

Evil “unregulated expansion.”

There are many articles about this from pro-market sources Mr. Olson could have chosen to link to, but the Village Voice is not among them, and is as persistently pro-regulation as any publication in the country.

5 OBQuiet 09.16.08 at 5:29 pm

Thanks Nicolas,

I confess, I missed that item. Maybe because it was dangerously close to ‘newspeak’ since the article goes on to describe how in this ‘unregulated’ industry

“The 1992 law required HUD’s secretary to make sure housing goals were being met and, every four years, set new goals for Fannie and Freddie.”

That hardly sounds like a deregulated environment.

But who am I to argue with the VV and our free press.

6 Hans Bader 09.17.08 at 10:51 am

My blog post, which Overlawyered linked to, noted that regulation helped CAUSE the mortgage crisis, and did not attack deregulation.

To prove that, I cited three articles, just one of which was from Village Voice. Two of those articles (editorials in the DC Examiner and Investors Business Daily) squarely blamed regulation.

The Village Voice article blamed both regulation (such as affordable housing mandates in the name of racial and social justice that pressured lenders to make risky loans) and the lack of regulation for contributing to the mortgage crisis. It didn’t provide much concrete evidence of the latter causing the mortgage crisis, though.

I cited the Village Voice article because it showed that even a staunchly liberal publication could see the patently obvious role of federal affordable housing mandates, and the Government-Sponsored Enterprises, in spawning the mortgage crisis.

Did the author of the Village Voice article ALSO believe that a lack of regulation, in other respects, contributed to the mortgage crisis?

Yeah. It’s a liberal publication, right? What do you expect. A liberal publication wanting more regulation of some kind isn’t newsworthy or worthy of citation. It’s like a dog biting a man.

But a liberal publication like the Village Voice admitting that regulation (like affordable-housing mandates) contributed to the mortgage crisis — that IS news. It’s like a man biting a dog.

(I should note, by the way, that although government regulation helped spawn the mortgage meltdown, there was plenty of stupidity by purely private actors in the marketplace, driven by herd instinct. Alas, government regulators shared that herd instinct, as they usually do, and generally made matters worse, rather than better, encouraging risky lending in the name of “affordable housing,” increasing homeownership rates, and “diversity”).

7 Walter Olson 09.17.08 at 11:16 am

I don’t know whether this comes as a surprise to Nicolas, but I link every day to articles whose ideological premises I don’t necessarily share. In this case it’s news worth knowing that the sitting NY attorney general, who from his position you’d expect to be hip-deep in legal efforts to clean up after the housing finance disaster, has a long backstory of involvement with some of the major players in that disaster. Wayne Barrett and I no doubt disagree on a great deal, but he’s provided one convenient jumping-off point for those trying to understand that backstory.

8 Todd Rogers 09.17.08 at 11:59 am

This “crisis” as it’s called in the drive-bys – I call it a correction, just goes on to bolster my long held belief that in financial transactions, both the borrower and lender should do a thorough analysis and mutual due diligence to ensure the deal is smart. I mean, how difficult is it to build a simple self-cash flow statement which accurately reflects your personal state of affairs and whether or not in two to three years you will be able to handle a jump in monthly expenses? Too many people bought in to Citi’s “Live Richly” ad campaign a few years back. When my Lexus-driving friends ask me why I still drive a Honda, I just kind of chuckle. I’ll buy a Lexus, for example, when I can afford to buy ten of them.

9 Nicolas Martin 09.17.08 at 1:47 pm

I know that the site has links to articles whose ideological premises Mr. Olson doesn’t share, but why in this case? Americans have enough access to articles promoting financial regulation without Overlawyered piling on. What they need are pointers to some of the fine articles which explain why free markets will function better (and more ethically) to solve this problem. If Overlawyered is going to stretch this far to the perimeter of legal issues, I’d hope that the information linked would have extraordinary intellectual merit.

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