Sunday, October 12, 2008

Fannie, Freddie, and Fear of the "Arab"

The McCain campaign, as we all know now (including members of the migration of Independents to the Obama vote), has been a nasty piece of work. It is a fear-mongering, divisive, and rather stupid campaign bereft of a consistent and coherent set of ideas. Its last card was also always its first: that John McCain is a man of upstanding character and that that's a good enough reason to vote for him. That's all over now. He has shown himself to be a petty, small, and not terribly bright man (and I even propose this - for those of you dismayed by the lack of intelligence of George Bush, consider that McCain might not even achieve Bush's level).

But they've been trying to build a larger narrative, which the reality-based community appears not to grasp. Since the financial and economic meltdown is so complex that many of those working on the issue aren't sure of its dynamic and potential effects, and since it's thus difficult to turn it into political points because no one in Washington is exactly sure where to play out the politics, the Republicans seem to have directed efforts towards manufacturing their own reality out of the mess, as they're wont to do.

The McCain people and surrogates have been trying to turn a particular narrative - in brief, that Fannie and Freddie are the cause of the global economic meltdown and that Barack Obama's campaign is in bed with the former leaders of Fannie/Freddie. If you talk with Republican true-believers, you hear this over and over. Fannie and Freddie are the root of the meltdown.

This helps paint part of a larger picture about Obama that apparently plays well with many Republicans. It involves:
  • Fear on the part of everyone regarding what the financial crisis will mean over both the shorter- and longer-term.
  • Fear of world government (that government intervention in the global financial crisis is the first step).
  • Fear or disdain of minorities (Fannie and Freddie were targets before the current crisis because they offer low-interest loans to minorities and the eocnomically disadvantaged - as Neil Cavuto of Fox said, "Loaning to minorities and risky folks is a disaster").
  • Fear of "the Arab" candidate (or "Muslim") in search of a new global order.
  • (And toss in fear that "liberals" - tolerant of minorities and "Muslims" - are going to take away Christmas from everybody).
But, as usual, the house of paranoia comes tumbling down when its foundation turns out to be wrong.
As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.

Commentators say that's what triggered the stock market meltdown and the freeze on credit. They've specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie's and Freddie's financial problems.

Federal housing data reveal that the charges aren't true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.

Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height vrom 2004 to 2006.

Federal Reserve Board data show that:

_ More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

_ Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

_ Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.

The "turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007," the President's Working Group on Financial Markets reported Friday.

Oh well, so much for that. This isn't to say, however, that that fuzzy picture of the world is going away any time soon.

No comments: