A 1980’s Bloom County comic strip features a newspaper editor, typewriter and liquor bottle near at hand, composing an editorial. “It’s Reagan’s Fault. Everything’s Reagan’s Fault.” A lot of people still agree and Ronald Reagan’s supposed posthumous legacy now includes our current financial crisis. Let business run amok without adequate government oversight and greed has inevitably led to disaster. It just took a while.
I disagree and am more than a little suspicious that government oversight was the cause and not the solution. That Fannie Mae and Freddie Mac were a disaster waiting to happen has long been clear to many, including me and I am no financial wizard. But Congressman Barney Frank, currently much in the news with calls for increased federal oversight of business, had this to say in 2003, “I want to roll the dice a little bit more in this situation towards subsidized housing.” The administration asked Congress to reign in quasi-governmental mortgage lenders in 2005, but that died when Senate Democrats filibustered.
So it appears that current problems were foreseeable and at least partially government responsibility. Of course banks were stupid too. But the stupidity of bankers is very old news and the new ingredient that pushed things over the edge this time appears to be political greed rather than greedy business. You may have noticed that the shit really hit the Wall Street fan within days of the government takeover of collapsing Fannie and Freddie. They have always been government sponsored and were very probably the catalyst for the current crisis.
But if the press blames Reagan, at least in Bloom County, then guess what? I think we might plausibly blame on the press this time. “It’s All Murdoch’s Fault!”, would be the headline, preferably on the front page of the Wall Street Journal.