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This is the fifth and final installment of our series excerpting the chapter on politics from Thomas Sowell's latest book, "The Housing Boom and Bust." We have run the series because of a general lack of knowledge about the mortgage meltdown that brought the world's financial system to its knees, bringing on an 18-month recession and triggering the second stock market crash in eight years.
We also think it offers lessons about what happens when the government, usually with the best of intentions, usurps functions previously carried out by the private sector and tries to force outcomes traditionally determined by a free market.
Sowell, now scholar in residence at Stanford University's Hoover Institution, is considered by some to be America's greatest economist and contemporary philosopher. "The Housing Boom and Bust" is his 43rd book and 10th in the past five years.
This series followed a nine-parter that ran on these pages from Oct. 28 to Nov. 9 and excerpted the chapter on "The Economics of Medical Care" from the other book Sowell has published this year, an update to his classic "Applied Economics."
IBD Exclusive Series:Thomas Sowell on The Politics of the Housing Boom
Congressional support for Fannie Mae and Freddie Mac went far beyond words. When the Office of Federal Housing Enterprise Oversight — the agency overseeing these government-sponsored enterprises — turned up irregularities in Fannie Mae's accounting and in 2004 issued what Barron's magazine called "a blistering 211-page report," Republican Sen. Kit Bond called for an investigation of the Office of Federal Housing Enterprise Oversight, tried to have their budget slashed and sought to have the leadership of the regulatory agency removed. Democratic Congressman Barney Frank likewise declared: "It is clear that a leadership change at OFHEO is overdue."
In short, Fannie Mae's political support in Congress has been bipartisan. "Fannie Mae and Freddie Mac's employees and political action committees donated nearly $5 million to current members of Congress since 1989," according to the St. Louis Post-Dispatch. Sen. Bond received $95,000 and Sen. Christopher Dodd received $165,000. According to the Wall Street Journal:
The two companies employ armies of lobbyists and consultants and are major campaign donors. "There has been no more powerful organization in Washington than Fannie Mae," said Rep. Chris Shays, R-Conn. "They have been able to manipulate the regulatory and legislative process for years."
Such criticisms of the political protection of Fannie Mae and Freddie Mac were not confined to conservative publications like the Wall Street Journal. Essentially the same criticisms were made in the liberal Washington Post:
Hypocrisy: Sen. Max Baucus' office defends his girlfriend's big pay raise by pointing to the raises others living off the taxpayer spigot got. What sympathy for the 10% of Americans suffering unemployment. If you didn't think the Democrats in power in Washington are doing enough to spark a ...
The classic confrontation between Humphrey Bogart and Alfonso Bedoya in "Treasure of the Sierra Madre" is being reprised, featuring banditos from East Anglia, Penn State, Washington and the U.N. "We're Federales," they tell us. "You know, climate police. Evidence? We ain't got no evidence. We don't ...
Health Care: IBD recently ran an extensive series of pieces by economist Thomas Sowell highlighting government's involvement in the financial meltdown. We did it both to correct the historical record and to warn about future interventions of the same kind. The most important warning is over ...
Loyal Opposition: The president has called on Republicans to "stop trying to frighten the American people." But telling the truth about the never-ending expansion of government is not scaremongering. First, Democrats in Congress kept their colleagues on the opposite side of the aisle from a ...
It wasn't so long ago that Barack Obama's speeches were being hailed as "extraordinary" "rhetorical magic" (Joe Klein in Time) that should be "required reading in classrooms" (Bob Herbert in The New York Times). Pity the poor grade-schoolers who have to be on the bus at 5am for a daylong slog ...
Posted By: Brownknows(740) on 12/14/2009 | 5:31 AM ET
ajmc; points well taken, and you are correct in stating the Dems went over the cliff years ago, problem is they took the constitution with them this time. Rockefeller country club and elitists with their 'moderate' positions drove Republicans into the ditch. The Democrats are a multiple fatality accident, the Republicans, a fender bender. Would the next president please hire Sowell to head their economic team?
Posted By: mikedezkid(170) on 12/13/2009 | 8:39 PM ET
Lets not forget that Rahm Emanuel served on the board of FNMA during their years of "accounting irregularities". Remember the moaning about *** Cheney and Halliburton we had to hear from the dems...where's the outcry now? Hypocrites.
Posted By: EkMg(5) on 12/13/2009 | 3:40 PM ET
Which is more pernicious: robbing a bank with force or exercising corrupt practices by Congressman, Senator or President? How about blatant nonfeasance by a Sp Ct Justice re extortion over GM bondholders? Or refusal to serve in Armed Combat to satisfy life and freedom? Or receipt of words from Milton Friedman or Thomas Sowell with no immediate response to robberies, extortions, takings/thefts? Or defaming history rendering Country negligent, irresponsible, misguided, defenseless and bankrupt?
Posted By: RealityCzar(30) on 12/13/2009 | 5:17 AM ET
Not only beyond words, but beyond the pale. This is the result of a highly political, quasi-goverment agency, with a huge goverment bankroll, injected into the heart of what should be a free market.
Posted By: R10002432342(115) on 12/12/2009 | 11:31 PM ET
Sowell's "Housing Boom and Bust" is a classic and I encourage you to read it. I read it and passed it to my father. If more people understood economics like Sowell does, the world would be a better place.
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