His new book will enable George Bush to elbow his way into the headlines just in time to muddy a conservative GOP message

George Bush has positioned himself as the author of this year's October Surprise. To surprise us, however, he would have to come across as a conservative, and nothing in his past suggests such an unlikely course.

He has not received the discredit he deserves for the sorry condition of the American economy, the gigantism of its government, or the high-handedness that Washington officials demonstrate toward American citizens and state and local institutions on a daily basis.

We are where we are because Bush took it upon himself, as president, to destroy the traditional housing market so that banks, other financial institutions, and two hiring halls for out-of-work Democrats, Fannie Mae and Freddie Mac, could compassionately distribute house mortgages to anyone who asked.

The vehicle for Bush's largesse, the Community Reinvestment Act, had already been in effect for 23 years when Bush assumed the presidency in 2001. In truth, however, it had never amounted to much, as is apparent in the accompanying illustration. That soon changed, as Bush called for higher and higher increases in home ownership.

Some questions remain unanswered. Why, for instance, was it compassionate to encourage borrowers to obtain mortgages when there was little or no chance that the borrowers could keep up the monthly payments?

Once the housing bubble had materialized, why was it compassionate to continue pushing out high-risk mortgages given the likelihood of an eventual bursting of the bubble?

In deliberately destroying a traditional housing market that had relied largely on local lenders who could assess credit worthiness, Bush and his allies contravened free market principles that were central to the founding. Through elections and commerce, the founders left it to individuals and families to determine who had power, what was produced, and who was eligible to borrow money.

Bush's free-wheeling, high-risk mortgage bazaar ran directly counter to that carefully crafted system.

Now, while still reeling from the housing market collapse, we have to contend with an even more anti-market regime that believes government knows best, even as Arlington National Cemetery tries to correcr errors by matching corpses with the correct headstones.

While the arrogance, fascism and incompetence of the Obama administration is annoying, to say the least, it is having the effect anticipated by the founders. Free market, small government conservatives are again ascendant in the Republican Party, while the Tea Party provides strong conservative voices inside and outside the party.

Republicans appear to be heading for triumph in the November election.

So, the question arises: why is Bush publishing his book, Decision Points, shortly after the election, knowing that the publisher will start isssuing teasers to build interest in the book weeks earlier, during the campaign? A president known, and sometimes reviled, as a Big Government, big spending Republican apostate will elbow his way into the headlines at a time when a chastised Republican Party, under the watchful eye of the Tea Party, has a chance to return to power and place a tether on runaway government.

By doing so, Bush will  muddy the Republican message, perhaps deliberately. After all, if the Republican Party makes a right turn, no more Bushes will be elected president. Conservatism is not to be found in their genes.

Steve Sailer in VDare.com

...the Community Reinvestment Act was negligible until the 1990s. And it was still small potatoes until the Clinton “reforms” of 1995 and the rise of well-organized pressure groups of the kind affiliated with the NCRC.

But the biggest flood of CRA assurances came during the presidency of George W. Bush, who repeatedly called in 2002-2004 for 5.5 million more minority homeowners by 2010. Cumulative bank pledges (typically doled out over ten years) grew from $1.85 trillion in 2002 to $4.20 trillion in 2004.

Indeed, total CRA commitments increased by $1.63 trillion in 2004 alone, the first year of the Housing Bubble.

(snip)

In 2004 alone, banks publicly promised to lend over the next decade to CRA-qualified minority and lower income neighborhoods the sum of $1,630,000,000,000.00.

That’s a big number.

And those kind of numbers put a lot of upward pressure on home prices as they got incorporated into expectations. Not surprisingly, the subsequent mortgage defaults that plunged the world into economic crisis are disproportionately concentrated in CRA-covered minority and lower income communities.

Using the NCRC’s data, I created this more readable graph to show CRA agreements by year from 1977-2004:

...the CRA has contributed to the mortgage disaster through a more subtle “selection effect”.

Assume there are two distinct kinds of bankers:

Optimists who think lending more money to CRA-approved folks will turn out to be profitable.

Pessimists who don’t.

Of course, there are always a lot of people in the middle without strong opinions who will go with the flow toward whichever camp seems to be gaining in money, power, and popularity.

If you were a Pessimist who didn’t believe that the government’s favored borrowers were likely to pay their mortgages, the CRA couldn’t make you lend to them. But if you didn’t play ball with the CRA, you couldn’t buy other banks, which is the easiest way for a bank to get big.

And the CEOs of big banks get paid more:

"There continues to be a high correlation between CEO compensation and bank asset size, and no correlation with three-year [earnings-per-share] growth and shareholder returns,’ Citigroup banking analyst Ruchi Madan wrote in a May 6, 2005 report on bank executive pay.”[Are reforms working? Experts say link between pay, performance is lacking, By Len Boselovic, Pittsburgh Post-Gazette, May 15, 2005]

See how it works?

Not surprisingly, over the years the CRA’s chokehold on mergers changed the culture of banking. The most powerful and highest paid executives publicly saluted the CRA, while the CEOs who thought it was politically correct nonsense were relegated to the sidelines in the great game of mergers and acquisitions.

The optimists who agreed with Presidents Clinton, Bush, and Obama that “underserved” minorities would somehow come up with the scratch to pay off their mortgages were allowed to build empires, while the pessimists were not. Those in the middle camp went with the flow and started believing the CRA propaganda.

Q. Whom do we want to win: the Optimists or the Pessimists?

A. Neither! We want a financial system in which the realists succeed and wind up in positions of power. Whether the realists will turn out to be this moment’s Optimists or the Pessimists is not something we should decide ahead of time.

But, that’s exactly what the Community Reinvestment Act does. It puts the government’s thumb heavily on the scale on the side of the Optimists, with, as we’ve seen, catastrophic results.

It’s time to repeal the CRA.

And it’s long past time to recognize the reality of human differences.

In 2006, commenting on Iraq, I wrote:

“Not for the first time, our public class’s refusal to think rationally about race and ethnic differences had resulted in bad—in this case, catastrophic—public policy.”

Beware: George Soros and his influential friends are coming to repair the economy

One should never stand in awe of academicians or economists, no matter how big their names or reputations.

The following quotations underscore the need for skepticism:

"Large swaths of economics are going to have to be rethought on the basis of what's happened." So said Larry Summers, President Obama's chief economic adviser, in an interview in the weeks after the markets crashed a year ago."

"Now financier George Soros is announcing a $50 million effort to speed things along," Michael Hirsch writes in Newsweek. "This week Soros is gathering some of the leading practitioners of the market-skeptic school, who were marginalized during the era of "free-market fundamentalism," among them Nobelists Joseph Stiglitz, George Akerlof, Michael Spence, and Sir James Mirrlees. He's also creating an "Institute for New Economic Thinking" to make research grants, convene symposiums, and establish a journal, all in an effort to take back the economics profession from the champions of free-market zealotry who have dominated it for decades, and to correct the failures of decades of market deregulation. Soros hopes matching funds will bring the total endowment up to $200 million.

"Economics has failed not only to predict and explain what happened but has also failed to protect society," says Robert Johnson, a former managing director at Soros Fund Management, who will direct the new institute. "That's what the crisis revealed. The paradigm has failed. There is no guidance."

None of this bears any resemblance to what actually brought down the economy. This is understandable. Larry Summers and George Soros are Democrats who are intent on building up government's role in the economy.

All of them presumably carry in their heads a century old liberal paradigm, born at the same time as modern industrial capitalism,  that assigns members of modern societies to three groups:

First, there are the ordinary folks who cling to their bibles and guns and work hard to improve their lot in life. Unfortunately, to the liberal mind, they do not grasp what is really in their best self-interest, are politically weak and easily misled.

Second, there is the establishment, which comprises the rich, successful
buseiness proprietors and corporate executives and financiers. These are the folks who are commonly said to run the country. Liberals regard them as ruthless exploiters in search of personal gain and little else.

And then, in the words of John Steele Gordon, "there is the third group, those few, those happy few, that band of brothers, the educated and enlightened liberals, who understand what is really going on and want to help the members of the first group to live a better and more satisfying life. Unlike the establishment, which supposedly cares only for itself, liberals supposedly care for society as a whole and have no personal self-interest."

So, now we have a band of brothers made up of George Soros, Larry Summers, Joseph Stiglitz, Michael Pence, George Akerhof, and Sir James Mirrlees. They undoubtedly will fashion a reprise that will cast full blame for the collapse on ruthless, self-interested financiers while holding government blameless. After all, they can work their magic only if they bend public and political opinion to their conclusions.

They need government to translate their personal opinions into the law of the land.

An antidote is in order.

An unbiased explanation for the ecoonomic collapse would lead inevitably to the conclusion that free markets have not existed in the United States for a very long time.

The housing market was, in fact, deliberately destroyed by heavy-handed government starting in the 1970s, when courts and the armies of compassion forged an alliance, later joined by Republican, as well as Democrat, administrations.

It started with a court order requiring an end to redlining, a practice that made it difficult, if not impossible, for residents of some inner city neighborhoods to get mortgages. The Carter administration responded with the Community Reinvestment Act, which made redlining illegal and required inner-city lending.

Over the years, the minimum lending levels grew, which meant that more and more high-risk mortgages were granted. Under President George W. Bush, usage of the reinvestment act grew sharply. In effect, Bush used the cover of law to move left, broadening his appeal to voters outside the conservative and Republican folds.

In its first modern push to expand home ownership, Congress in 1970 created Freddie Mac, a companion to Fannie Mae, which dates to the Great Depression. Both were instrumental in wrecking a housing market discipline that had endured for 200 years.

Traditionally, a bank or savings and loan would accept a mortgage application, assess the financial condition of the applicant, then grant or deny a mortgage.

Under the new regime, a local bank no longer had to worry about an applicant's finances. The bank would hold the mortgage for hours or days, then unload it to Fannie or Freddie. They no longer had any skin in the game and could increase their profits by being more and more reckless.

Risk, previously the biggest factor in any business transaction, now had legs, and was no longer a factor in mortgages.

Fannie and Freddie bundled mortgages of varied risk levels and sold them to investment banks, which bundled the bundles and sold them as big-ticket securities all over the world.

With investment money pouring in from everywhere, the U.S. housing market boomed. Then, when the economy softened and the defaults started, the economy collapsed.

Now, some giants of economics and finance, such as Stiglitz and Soros, are pointing the finger of blame at free markets, which the founders took pains to establish in the U.S. constitution, and deregulation of markets.

In essence, they are blaming the victim for failing to withstand the blows of the powerful government mugger while excusing the ACORN thugs, the armies of compassion and the political geniuses who systematically destroyed a free market sytem that had exercised discipline over the mortgage process for two centuries.

Former Federal Reserve Chairman Alan Greenspan issued a semi-apology a year ago for a Federal Reserve policy that had held interest rates too low for too long, contributing to the housing market bubble..

He attributeed the “mistake” to his belief that banks, operating in their own self-interest, would do what was necessary to protect their business and its shareholders. Greenspan called that “a flaw in the model ... that defines how the world works.”

In other words, Greenspan admitted participating in a prolonged stimulation of the housing market, then blamed the market for failing to withstand the government intrusion and carry on its gatekeeping function.

Greenspan did not mention, and congressional inquisitors failed to ask, about ACORN thugs who picketed local banks and browbeat bankers who failed to comply quickly with their lending demands.

The founders would not be pleased by the governmental quackery that has badly damaged their careful construct.