Government Blameless in Bubble/Bust/Bailouts?

Reason has a critique of The Big Lie column. It was so disingenuous, I did something I rarely do: I sent an email to the author and editors at Reason. It went something like this:

I was disappointed to read your comments about my “Big Lie” column. You seem to have completely misread who I was blaming and what the Big Lie actually is.

Only one of two explanations suffice: Either I did a poor job communicating what the issue was, or you purposefully mischaracterized what I wrote.

On the possibility it’s the former and not the latter, allow me this further explanation.

The quote that I critiqued was Mayor Bloomberg’s whopper that the crisis was caused by Congress forcing banks to make ill advised loans to unqualified people. That statement is demonstrably false, and it is what I wrote in the WP. Not, as you described, that government was blameless.

Indeed, beyond the Post column, I have pointed a finger at Washington DC repeatedly. From the very early stages of the collapse, I have stated DC was a significant contributor. Indeed, early in the crisis, I described the government as “Uncle Sam the enabler.” (A Memo Found in the Street, Barron’s September 29 2008).

In the Big Picture blog, I made a list of the top blamees (Who is to Blame, 1-25, June 2009) It is dominated by government players, including the Fed, Congress, SEC, various Senators and Presidents, two FOMC chairs, the OCC, OTS, Treasury Secretaries, as well as private bankers and organizations.

And in Bailout Nation, I clearly detail how Congress did the bidding of Wall Street to allow special exemptions, waivers, and new legislation that contributed to the credit crisis, housing boom and bust, and Great Recession.

Your cartoonish argument is reductio ad absurdum – nowhere in the WP article do I remotely suggest the “big lie” was that Washington, DC played no role. But I do call out the nonsense Bloomberg was peddling, and you are pushing, that banks and Wall Street were merely innocent bystanders in all of this, and somehow were forced into these bad loans.

I would love to see any evidence you can muster that government forced banks to stop verifying employment and income, mandated no credit checks, eliminated debt servicing review, forced 120% LTV lending, or somehow pushed 2/28 ARM mortgages.

Less silly, please.

P.S. The print edition of the article, as well as my online edition, has 12 points numbered, not bulleted. That’s either a font or a browser issue on your end.

As William James noted, “a great many people think they are thinking when they are merely rearranging their prejudices.”

UPDATE: November 11, 2011, 11: 45

Tim prints my response, and adds to the discussion here.

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