The MSM are clueless
September 14, 2008 – 6:10 pm by JohnI’m glad that this week I perused Taki’s Magazine for the first time in months, since I found this excellent commentary on the Fannie and Freddie government takeover.
One amusing aspect of the New York Times’s coverage of the government takeovers of Freddie Mac and Fannie Mae is that throughout the Gray Lady’s 2000-word lead essay, it’s never once mentioned that the two lending institutions have, well, already been federal organizations for the past 70 years (!). The latest “nationalization” is not too different from the government deciding to step in and take over public education or the forest service.
Both Freddie and Fannie were New Deal projects meant to subsidize homeownership. The only reason that the Times, or anyone else, thinks that the pair are independent businesses is that LBJ enacted a sham “privatization” around 40 years ago. In practice, the government became Freddie’s and Fannie’s guarantor—the boards could take home or reinvest all the gains, but then they still had access to the Federal Treasury and basically operated under the assumption that the government would cover any major debts. Profits were privatized, losses socialized.
That was his emphasis, but I wanted to reemphasize it myself with purty bold letters: Profits were privatized, losses socialized. This is the essence of corporate-state socialism.
With the latest takeover, we’ve of course heard that Washington is moving away from the chaos of the wicked free-market. Few are pointing out, however, that Fannie and Freddie made terrible financial decisions, and helped blow up the subprime bubble, precisely because the higher-ups knew that if investments went south, Washington would be there to pick up the tab. And then there’s Freddie and Fannie disastrous involvement in “diversity” quotas for lending, which Steve Sailer wrote about here not too long ago. Put simply, the whole “semi-private” arrangement proved, in many ways, worse than the out-in-the-open socialism of federal lending during the New Deal era.
This reminds me of why some libertarians argue that the neocon wing of the Republocrat party is worse than the environmentalist-socialist wing of it: their absurd “small government” rhetoric combined with their equally big-government agenda makes them more dangerous than the liberals who come out and openly endorse big government. (The fact that the average voter still buys the small-government ploy of the neocons lends yet more support to the libertarian assertion that the dumb masses should have nothing to say about how our lives are run and is enough in and of itself to discredit democracy altogether.)
Anyway, the fact that the Times isn’t interested in even acknowledging this history lends a certain ironic caste to its reporting:
Take for instance:
The seizure of Fannie and Freddie is all the more surprising because, as recently as late March, Washington viewed the companies as saviors of the housing market and the economy, rather than as risks to them. Instead of requiring Fannie and Freddie to scale back, regulators gave them a green light to buy and guarantee more and bigger mortgages.
Being that the whole bloody point of the programs was to flush the housing market with credit, I don’t know how anyone could be “surprised” that regulators would be pushing for more risky loans to “save” an industry whose bubble was about to burst.
Mr. Paulson added a mantra of his own: he privately said he didn’t want to ‘kick the can down the road and leave the problems for a future administration and Congress to solve. […]
As possibilities were debated, Treasury officials eventually concluded that if they had to act, the best choice was a conservatorship—a takeover that would make government backing of the companies’ debts and obligations explicit but would remove the companies’ leadership while still keeping them operating.
‘They called it “sticking the companies in a timeout,”’ said one person with firsthand knowledge of the conversations. ‘It protects the safety and soundness of the economy but also gives everyone breathing space.’
All these kindergarten metaphors are pretty cloying—but then also apt. In giving Freddie and Fannie a little nationalization “timeout,” the government is basically allowing the misbehavin’ pair not to suffer the consequences of its actions. Most moms can tell you what happens when you reward bad behavior.
I have read or heard many times, from newspaper journalists and newspaper readers, that if you don’t read full newspaper articles, you just don’t get the depth of reporting, you know, the whole story and the more subtle facts, which are left out of TV reports, radio news, blags, and other websites. This pathetic New York Times article is yet another example of the bias and completely lax reporting that saturates newspapers across the world. If you hear any friends, colleagues, or MSM employees lamenting the ongoing demise of newspapers, don’t lament with them. Their death can’t come soon enough.
