What I think I know about subprime
As I’ve heard so much all-or-nothing rhetoric on the subprime mess lately — and since I’ve occasionally fallen into it myself in discussing the issue with politically minded friends — here is what I think I know. There are opposing political schools of thought:
1. Republicans are arguing that that Fannie and Freddie were the key catalysts, the most important factors, and that once they collapsed the rest of the economy was sure to go. If Democrats weren’t so concerned about lending to people — mostly minorities! — that couldn’t afford their houses, we wouldn’t be in this mess. Obama loves Freddie/Fannie, and thus hates you. Country First.
2. Democrats are arguing that by stripping regulations, Republicans and their greedy, evil investment banker buddies robbed the folksy folk on Folk Street. By allowing predatory lenders to do the things predatory lenders do, Republicans and their individualistic dogma left reg’lar Americans out in the cold. That’s not change we can believe in.
The actual story: Elements of truth in both versions. If Fannie and Freddie hadn’t been losing so much market share to other companies during the subprime boost, they would have stayed away, and we wouldn’t be in as bad of trouble, but we’d still be in deep trouble because those companies were still subpriming their way to huge margins. We’d still be where we are.
In other words: Both sides are to blame. The mess we’re in is neither entirely the fault of evil bankers, nor is it because Democrats gave houses to too many poor people.
I think.
