Mortgage & Loan: It's The Economy, Stupid

I've mused a few times over the last 18 months on why the Bush administration is so dead-set on privatizing and regulating Fannie & Freddie, given their extremist anti-regulation stance on almost every other issue.

It was a commenter at Economist's View discussing the role of the Fed that clinched it for me:

The Fed deliberately let Fannie and Freddie disturb the economy to the point that Greenspan went to Congress and asked for legislation to rein in those portfolios. This was deliberate, desperate and randomly disturbed by reckless hedging on Fannie's part that 2500 accountants are still too professional to disclose. This Fed interference prolonged the housing market (improved productivity and growth then) and paved the way for the major correction we are about to face now.

Makes a lot of sense. You can rant about conspiracy theories all you want, but this totally fits Bush's MO of running public assets into the ground and then saying, "This proves Big Gummint don't work," thus granting the excuse to privatize and leave them at the market's mercy. Yet another example of Greenspan's complicity in the failure of the housing market as well.

Quite an irony, then, that it's higher wages that is offsetting the losses the economy is suffering from the housing bust. After years of excessive living on credit, profligate spending, and the propagation of terrible "creative loans" and shady lenders, it turns out to be--gasp--better pay that saves us.

I mean, really? Wage gains enabling more purchasing in the economy? That's crazy talk. I can't imagine who might have thought that.

Posted at November 20, 2006 02:50 PM

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I've mused a few times over the last 18 months on why the Bush administration is so dead-set on privatizing and regulating Fannie & Freddie, given their extremist anti-regulation stance on almost every other issue. It was a commenter at Economist's View discussing the role of the Fed that clinched it for me: The Fed deliberately let Fannie and Freddie disturb the economy to the point that Greenspan went to Congress and asked for legislation to rein in those portfolios. This was deliberate, desperate and randomly disturbed by reckless hedging on Fannie's part that 2500 accountants are still too professional to disclose. This Fed interference prolonged the housing market (improved productivity and growth then) and paved the way for the major correction we are about to face now. Makes a lot of sense. You can rant about conspiracy theories all you want, but this totally fits Bush's MO of running public assets into the ground and then saying, "This proves Big Gummint don't work," thus granting the excuse to privatize and leave them at the market's mercy. Yet another example of Greenspan's complicity in the failure of the housing market as well. Quite an irony, then, that it's higher wages that is offsetting the losses the economy is suffering from the housing bust. After years of excessive living on credit, profligate spending, and the propagation of terrible "creative loans" and shady lenders, it turns out to be--gasp--better pay that saves us. I mean, really? Wage gains enabling more purchasing in the economy? That's crazy talk. I can't imagine who might have thought that.