How Democrats nearly de­stroyed the econ­omy

The Washington Times Weekly - - Commentary -

Win­ston Churchill: His­tory will be kind to me for I in­tend to write it. There is his­tory, a chron­i­cle of hu­man events, and then there is per­ceived his­tory. So of­ten, the two are wildly at odds.

In 1963, a pop­u­lar Demo­cratic pres­i­dent was as­sas­si­nated by a Marx­ist named Oswald, who had ac­tu­ally de­fected to the Soviet Union and re­turned to the U.S. with a Soviet wife, was an ac­tive mem­ber of the Fair Play for Cuba Com­mit­tee, and had at­tempted to as­sas­si­nate a right-wing gen­eral named Ed­win Walker ear­lier in the year.

Yet those who write his­tory found these facts in­con­ve­nient. They cre­ated a dif­fer­ent his­tory in which the “at­mos­phere of hate” in the south­ern city of Dal­las, Texas, led to the ter­ri­ble po­lit­i­cal vi­o­lence. In other words, it was po­lit­i­cal con­ser­vatism that led to John F. Kennedy’s as­sas­si­na­tion. This per­ceived his­tory was re­cy­cled as re­cently as the shoot­ing of Rep. Gabrielle Gif­fords. ABC’s Chris­tiane Aman­pour, in­ter­view­ing Jean Kennedy Smith, noted that the Kennedy as­sas­si­na­tion was “eerily rel­e­vant” and asked Kennedy to eval­u­ate the “po­lit­i­cal at­mos­phere” in the coun­try to­day.

Start­ing just a few years af­ter the Kennedy as­sas­si­na­tion, Amer­i­can lib­er­als be­gan to con­sider anti-com­mu­nism a kind of men­tal dis­or­der. Hos­til­ity to com­mu­nism was akin to racism, sex­ism and other char­ac­ter flaws. Rea­gan’s de­scrip­tion of the Soviet Union as an “evil em­pire” ce­mented lib­eral sus­pi­cions that Rea­gan was a dan­ger­ous buf­foon. Yet start­ing in 1989, when the Ber­lin Wall fell, lib­er­als be­gan to find their an­tianti-com­mu­nism em­bar­rass­ing. And so they cre­ated a per­ceived his­tory, one in which the Cold War was a time of con­sen­sus, a time when, as for­mer Sen. Bill Bradley put it, “We knew where we stood on for­eign pol­icy.”

More re­cently we’ve wit­nessed the cre­ation of new his- tor­i­cal nar­ra­tive about the fi­nan­cial cri­sis of 2008. It’s both sur­pris­ing and grat­i­fy­ing, there­fore, to re­port that a great re­vi­sion­ist his­tory has just been pub­lished by none other than a New York Times re­porter, Gretchen Mor­gen­son, and a fi­nan­cial an­a­lyst, Joshua Ros­ner.

In “Reck­less En­dan­ger­ment,” Mor­gen­son and Ros­ner of­fer con­sid­er­able cen­sure for reck­less bankers, lax rat­ing agen­cies, cap­tured reg­u­la­tors and un­scrupu­lous busi­ness­men. But the great­est re­spon­si­bil­ity for the col­lapse of the hous­ing mar­ket and the near “Ar­maged­don” of the Amer­i­can econ­omy be­longs to Fan­nie Mae and Fred­die Mac and to the politi­cians who cre­ated and pro­tected them.

With a cou­ple of prom­i­nent ex­cep­tions, the politi­cians were Democrats claim­ing to do good for the poor. Along the way, they en­riched them­selves and their friends, stuffed their cam­paign cof­fers, and re­sisted all at­tempts to en­force mar­ket dis­ci­pline. When the in­evitable col- lapse ar­rived, the en­tire econ­omy suf­fered, but no one more than the poor.

Jim John­son, ad­viser to Wal­ter Mon­dale and John Kerry, amassed a per­sonal for­tune es­ti­mated at $100 mil­lion dur­ing his nine years as CEO of Fan­nie Mae. “Un­der John­son,” Mor­gen­son and Ros­ner write, “Fan­nie Mae led the way in en­cour­ag­ing loose lend­ing prac­tices among the banks whose loans the com­pany bought. A Pied Piper of the fi­nan­cial sec­tor, John­son led both the pri­vate and pub­lic sec­tors down a path that led di­rectly to the credit cri­sis of 2008.”

Fan­nie Mae lied about its prof­its, in­tim­i­dated ad­ver­saries, bought off mem­bers of Congress with lav­ish con­tri­bu­tions, hired (and thereby co-opted) aca­demics, pur­chased po­lit­i­cal ads (through its foun­da­tion) and stacked con­gres­sional hear­ings with friendly bankers, com­mu­nity ac­tivists and ad­vo­cacy groups (in­clud­ing ACORN). Fan­nie Mae also hired the friends and re­la­tions of key mem­bers of Congress (in­clud­ing Rep. Bar­ney Frank’s part­ner).

“Reck­less En­dan­ger­ment” in­cludes the Clin­ton ad­min­is­tra­tion’s con­tri­bu­tion to the home-own­er­ship catas­tro­phe. Clin­ton had claimed that dra­mat­i­cally in­creas­ing home­own­er­ship would boost the econ­omy, in­stead “in just a few short years, all of the ven­er­a­ble rules gov­ern­ing the re­la­tion­ship be­tween bor­rower and lender went out the win­dow, start­ing with . . . the re­quire­ment that a bor­rower put down a sub­stan­tial amount of cash in a prop­erty, ver­ify his in­come, and demon­strate an abil­ity to ser­vice his debts.”

“Reck­less En­dan­ger­ment” ut­terly de­flates the per­ceived his­tory of the 2008 crash. Yes, there was greed, when is there not? But it was gov­ern­ment dis­tor­tions of mar­kets, not “un­reg­u­lated cap­i­tal­ism”, that led the econ­omy to disas­ter.

Mona Charen is a na­tion­ally syn­di­cated colum­nist.

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