Kinder, gentler lending and the Panic of '08, Part II

There is a Canadian notion that America is the land of unfettered capitalism, where government dares not intrude in the natural course of economic events, and declines to police even the more bandit-like of business behavior. It is commonly found on college campuses, the CBC, etc., and I believed it myself once. But it turns out that there is a positively Canadian level of government intervention in the economy even in the post-Reagan United States, and particularly in mortgages and financing.

Far from hesitating to intervene in the economy for the protection of the poor and the destitute, the U.S. government has been overriding normal business practice in order to put poor folks into $100,000 homes, and effectively guaranteeing the gamble with taxpayer dollars. It is that massive government intervention which is at the root of this financial crisis -- not some pro-business deregulation, but affordable housing affirmative action.

It's bad form to be so partisan, but a disservice has been done to that unloveable bunch called Republicans, and in the spirit of this newspaper's mission statement about wrong not thriving unopposed, the record ought to be set straight. Republicans are being blamed for policies they never supported, while the very Democrats who championed the disaster are sought out for guidance. It is blaming the fire on the fireman, and entrusting the fire department to the arsonist.

And the blame ought not be put on either the borrowers or the lenders, who were only taking advantage of a perfectly legal -- and encouraged -- government-ordained system. That irresponsible borrowing and lending was precisely what the federal government had intended.

The federal government under President Clinton in the good-timing 1990s directed Fannie Mae and Freddie Mac to take on what would become $1 trillion in dodgy mortgages, and to spread the risk among other financial institutions, in order to meet their federal mandates for affordable housing.

Because Fannie Mae and Freddie Mac were creatures of the federal government, any financial outfit was happy to have their liability on its books, the assumption being that, if the bottom dropped out, the U.S. Treasury would be good for any paper with "Fannie" or "Freddie" on it. The reward may have been privatized, but the risk was socialized, in a perverse inversion of the principle behind trusting the market to make the best decisions.

Such deregulation as there was in this area had to do with an old chestnut from President Roosevelt's New Deal called the Glass-Steagall Act of 1933, which was repealed in 1999. That was a deregulation, sure enough, and one supported by Republicans, as well as President Clinton and Congressional Democrats. But allowing the combining of commercial and investment banking services as the Europeans do enabled neither subprime lending nor the over-leveraged securitizing that spread the subprime risk far and wide. The chief effect of Glass-Steagall's repeal here, in fact, has been to allow the formation of the few major financial institutions that are still standing.

President Clinton himself was not always so enthusiastic about this social engineering through government-mandated lending. Clinton in 1994 -- like President Bush in 2003 and Congressional Republicans in 2005-6 -- tried to fix the Fannie and Freddie problem while it was still fixable. Clinton's own account of what became of those attempted reforms may be the last word, as it is a noteworthy thing when Bill Clinton feels compelled to point a finger at his own side: "I think the responsibility that the Democrats have may rest more in resisting any efforts by Republicans in the Congress or by me when I was president, to put some standards and tighten up a little on Fannie Mae and Freddie Mac."

When it is occasionally conceded that Republicans opposed this mortgage monkey-business all along, the argument goes that they must be to blame nonetheless, because they controlled both houses of Congress for four of President Bush's eight years. It looks good on paper, but it's not the way things work in practice in the United States Senate.

Democrats have controlled the Senate for half of Bush's presidency, and the House for a quarter. And for the four years from '03 to '07 in which Democrats were minorities in both houses of Congress, they were never fewer than 45 percent of the Senate -- four seats to spare over the 41 percent necessary to effectively kill presidential initiatives and Congressional legislation. The Democratic minority's ability to deny cloture motions alone was enough to block reforms from consideration by the full Senate.

If all the keys to Washington are to be handed to this crowd who were still cheerleading for Fannie and Freddie as late as July, and who are even now blaming some imaginary deregulation for the failings in government direction of the housing and financial sectors, then it is difficult to see how the wreck can be put right before it has landed the advanced economies in a protracted contraction.

One day, the history of subprime lending and the Panic of '08 will be written, and it will bear little resemblance to the first draft, with all its "blame Bush" and "Republican deregulation" and "collapse of capitalism" boilerplate. It had precious little to do with President Bush or pro-business deregulation or even capitalism itself. It was government mandates to put poor folks into homes they could not afford, and effective government guarantees to financial firms for playing along with the racket, to bail them out at taxpayers' expense when the whole crazy social engineering project came crashing down.

Andrew W. Smith, Published in The Chronicle-Herald, Halifax, Nova Scotia

Saturday Night Live conservatives

By the time Dennis Miller had a show of his own in the 1990s, it was established that he was for the death penalty, at least. Miller's HBO show was even the soap-box for a memorably strident defense of American capitalism: "Coming to America and complaining about the capitalism is like walking onto a baseball field and complaining that nobody's playing soccer." But even there Miller defied labeling as a conservative, as by devoting an installment to "What's wrong with Republicans?" and appealing for answers to Arianna Huffington. Then came 2004, when Dennis Miller "came out" on The Tonight Show in the most unabashed apologia for President Bush. He explained later that he had found himself on the Right on some questions for some time, but that it wasn't 'til after the 9/11 attacks that he turned the corner to conservatism, with the accustomed qualifier that he wasn't so conservative on those bothersome "social issues". And Dennis Miller today is a defender of President Bush and booster of Rudy Giuliani and a no-foolin' conservative commentator, with jokes.

Norm Macdonald in the presidential election year of 1996 graduated to the leading Bob Dole impressionist, and when he signed off his final Weekend Update before Election Day with "Vote for Bob Dole," that might've been influenced by the prospect of Macdonald's elevation to leading impressionist of a president of the United States, or a joke. Macdonald appeared on a Comedy Central year-in-review special not long after the 2004 election with a stand-up act that came at John Kerry's campaign from the sort of angle a skeptic would see, but still, nothing declarative. Well, it turns out that Norm Macdonald is something of a conservative, and a John McCain man of long standing.

Sometime in the early-middle '90s, before nostalgia for President Reagan had spread beyond committed conservatives, Dana Carvey gave an interview on Later with Bob Costas which got around somehow to a recollection of Reagan's reaction to the attempt on his life. It was highly sentimental, with the sort of admiration unlikely in anyone who'd passed the 1980s shrieking "trickle-down economics" or other leftist indictments of the greatest presidency and greatest age in America since mid-century. Carvey's George H. W. Bush impression was something of a sensation in the early '90s and earned him a relationship with the actual George H. W. Bush, and there was no concealing Carvey's affection for the man. Then in California's gubernatorial recall election of 2003 Dana Carvey campaigned for Arnold Schwarzenegger -- this being before Schwarzenegger's unconservative governorship dispelled the notion of his being a conservative Republican -- and against the Democrat governor and lieutenant governor Carvey took no prisoners.

Adam Sandler signed an open letter in defense of Israel at the time of its summer war against Hezbollah in 2006. Not very Hollywood of him, but an otherwise-impeccable leftist may be excused a parochial, pet heresy. But it turns out that Adam Sandler also is a Rudy Giuliani man, a donor to Giuliani and in the fullness of time not impossibly also a public advocate.

And then there's Victoria Jackson, who's been known even to turn up on The 700 Club: a lifelong and devout evangelical Christian and a longtime conservative.

This probably is not a complete list, and SNL is of course an institution with by now so many seasons and so many casts, that an SNL alumnus or two might be expected to be political conservatives, as a matter of statistics. But to watch Comedy Central for any length of time is to appreciate that contemporary comedy and shrilly-partisan, stock leftism are twin worlds in America. If nothing else, the monopoly is broken.

Addendum: A couple more SNL alumni, lifelong Democrats both, driven off the plantation or all the way over to the other side in the Age of Obama. Jon Lovitz who by 2012 was a businessman laboring to keep up a couple California comedy clubs bearing his name, "went F-bomb" on Obama and his class warfare, on mic, and then admirably stood his ground when the little enforcers of the Left inevitably descended on him for his heresy and blasphemy. And in 2013 Rob Schneider whose vitamins business had been chased out of his Democrat one-party-state of California, converted to Republican and endorsed a Republican assemblyman for governor.