This is my second political posts in two days...If you haven;t read the first post read it here:
The Root Cause of the Financial Depression
This second post is my editorializing on today's freakonomics post in the NYT.
Why did Freddie and Fanny fail:
Update; WaMu is up for sale today. WaMu is the biggest savings and loan in America
From the NYT: Diamond and Kashyap on the Recent Financial Upheavals
Fannie and Freddie were weakly supervised and strayed from the core mission. They began using their subsidized financing to buy mortgage-backed securities which were backed by pools of mortgages that did not meet their usual standards. Over the last year, it became clear that their thin capital was not enough to cover the losses on these subprime mortgages.
Why did Lehman fail:
…Why did the financing dry up? For months, short-sellers were convinced that Lehman’s real-estate losses were bigger than it had acknowledged. As more bad news about the real estate market emerged, including the losses at Freddie Mac and Fannie Mae, this view spread….Lehman’s costs of borrowing rose and its share price fell. With an impending downgrade to its credit rating looming, legal restrictions were going to prevent certain firms from continuing to lend to Lehman.
Again can you say housing….It all goes back to people trying to turn sub-prime mortgages and Lehman and Fannie and Freddie and everyone else sports fans are caught holding the bag. Why did this happen? Because in Bush’s first term, it was politically expedient to push home ownership especially in light of the opportunity due to de-regulation.
How about A.I.G.
Here it is…
A.I.G. had to raise money because it had written $57 billion of insurance contracts whose payouts depended on the losses incurred on subprime real-estate related investments. While its core insurance businesses and other subsidiaries (such as its large aircraft-leasing operation) were doing fine, these contracts, called credit default swaps (C.D.S.’s), were hemorrhaging.
Why did this housing market problem happen?
People took too much risk and believed that something had changed in housing and therefore prices would never go down. This was a really stupid idea based in wishful thinking. The only way we could have believed this was that when all these sub-prime variable mortgage loans came due there would be INFINITE DEMAND for houses. But instead, there was a glut of houses and very little demand. Why so little demand? Low wages.
So why did people choose to believe what amounts to self-deception?
Greed and because de-regulation allowed them to do it. To do what, to put all of us at risk for the big bucks.
So this is my point about why it makes no sense in my mind for Christians to believe in republican free-market ideology. We as Christians know that the world is driven by greed and the will to power. So why are we against regulating greed and power in the markets. Because Christians have been duped by right wing politics that bundled together right to life issues and right wing economic dogma.
So why did we fall for this trap? It is because of our anti-intellectualism and our lack of thoughtful dialogue in our own communities about politics and other such issues. There is no room for discussion because there is such a huge social cost for not heeding the party line. Trust me. I know.