Sunday, March 22, 2009

Real conservatism and rent control

I am not sure why I spend time reading and attempting to argue with wingnuts. It seems to fulfill some probably-embarrassing psychological need. But one of my less embarrassing excuses for spending time that way is that it occasionally spurs me to original thought. Here is one such instance (original context here).

It occured to me that rent control, a classic target of right-wing ire, is actually a policy that should be embraced by true conservatives, if there were any. Why? Well, the idea behind rent control is that people and communities have some structure, value, and rights that are not captured by the free market. The usual situation that rent control is designed to remediate is where a community of low-income renters forms. People live there for possibly generations, building up community ties. Then the wealthy trendies move in next door, real estate prices rise, and the low-income people are forced from their homes, their community scattered.

So rent control may be viewed as an attempt to conserve the social capital of a community from the ravages of the free market.

The larger point of course is that unregulated markets are the least conservative thing imaginable. This is not an original point of course -- Marx and Engels made it quite memorably:
The bourgeoisie, wherever it has got the upper hand, has put an end to all feudal, patriarchal, idyllic relations. It ... has left remaining no other nexus between man and man than naked self-interest, than callous “cash payment” ... Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones ... All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses, his real conditions of life, and his relations with his kind.
Marx and Engels are of course no conservatives, but they are pointing out that capitalism is an uparalleled anti-conservative force. Rent control is designed to preserve social relationships that are not "feudal, patriarchal, idyllic", but are quite real and constitute a significant good. It's an attempt to graft some non-market rights into an otherwise unregulated market.

Now, my interlocutors pointed out that no conservative is in favor of rent control, which a Google search reveals to be pretty much true. What does that mean? It suggests that conservatism is not in fact an ideology devoted to preserving existing modes of life from the ravages of change, but is more like what Phil Agre says, an ideology devoted to preserving the power of the powerful. Some traditions, apparently, are more worth saving than others. This is not a surprise. In fact Agre makes pretty much the same point I'm trying to make:
And although conservatism has historically claimed to conserve institutions, history makes clear that conservatism is only interested in conserving particular kinds of institutions: the institutions that reinforce conservative power. Conservatism rarely tries to conserve institutions such as Social Security and welfare that decrease the common people's dependency on the aristocracy and the social authorities that serve it. To the contrary, they represent those institutions in various twisted ways as dangerous to to the social order generally or to their beneficiaries in particular.
Or to put it simply, "free-market conservative" is an oxymoron.

So I wonder if there has ever been an actual populist conservatism? Perhaps the Luddites. Unions are also conservative in this sense -- an attempt to put the brakes on the "creative destruction" of capitalism, to (in Buckley's phrase) stand athwart history yelling "stop".

So, while I find myself with some conservative impulses which are appropriate to my advancing age, I am completely un-sympathetic to the conservative movement, which only seeks to conserve privilege, and has done a shitty job of that. I might like to conserve the America of the early sixties that I grew up with, an America that was reasonably prosperous, equitable, and hopeful, but it's gone forever. What we have now is a doomed fauxconomy with a corrupt and incompetent ruling class of plutocrats. Only hail-Mary radicalism can save us now and our political leadership does not seem willing or able to be radical enough.

Note: I am not necessarily in favor of rent control, which usually seems to create as many problems as it solves. The anarchists from last week (and Marx) would laugh at it as a half-measure anyway, since it doesn't do anything about basic property relations. The Wikipedia article on rent control is pretty good.

Here's some more disgust at conservative hypocrisy from a former conservative.

21 comments:

TGGP said...

Only hail-Mary radicalism can save us now and our political leadership does not seem willing or able to be radical enough.
I suppose I'm quite radical myself (too radical a conservative traditionalist for "traditionalist conservatives" even), but taking the outside view I think everybody who has ever said radicalism would cure what ails has been wrong.

Would you favor immigration restriction as a way to preserve "early sixties America"?

mtraven said...

I think everybody who has ever said radicalism would cure what ails has been wrong.

Well, that's a bit of a generalization, don't you think? Radical problems require radical solutions. Radical times call forth radical actions even if those are "wrong" (ie, the backwardness of the Romanov Empire was cured by the Russian Revolution, even if the cure was worse than the disease).

Would you favor immigration restriction as a way to preserve "early sixties America"?

You can't preserve early sixties America. It's gone. In my view, immigration has very little to do with what's gone wrong with America or how to fix it. If you want to elicit anti-libertarian solutions from me, I'd pay much more attention to restricting the flow of capital than of labor, ie by imposing heavy tariffs to encourage domestic reindustrialization.

FWIW both my parents were immigrants.

Michael said...

It should be understood that what passes in the U.S. for conservatism with reference to economics is actually classical liberalism. Hayek, indeed, once wrote an essay entitled "Why I am not a conservative." To him, and other Europeans of his generation, "conservative" meant monarchism and support of an established church. You would be likely to find some support for rent controls and other economic interventions by the state amongst traditionalist Catholics, who are as close as anyone in the U.S. comes to the type of European conservatism Hayek rejected.

Rent control is interesting in practice because it creates a type of real-estate tenure intermediate between leasehold and freehold. For example, depending upon whether a New York City apartment is rent-controlled or rent-stabilized, the tenant has different rights and may in some cases give or bequeath his tenure to another, or sublease it (in which case the subtenant may not enjoy controlled or stabilized rents). Thus the tenures have more of the perquisites of ownership than are ordinarily associated with simple leasehold, and come more to resemble such old feudal tenures as copyhold in English law or feu ferme in Scots law, which gave dominium utile to the tenant.

A friend of mine who is a member of the New York bar once told me that there was a small but lucrative specialty practice of rent-control law in New York City that was almost impossible for a general-practice attorney to enter, because there is no regular case reporting on it and thus it is very difficult to do research. The established practitioners have extensive files and personal knowledge of precedent in the field, which they guard jealously. There is a rough parallel here to the practice of feudal law in Scotland in the recent past (it lasted there until Martinmas 2004).

It is facile to say that "Social Security and welfare decrease the common people's dependency on the aristocracy and the social authorities that serve it." They merely transfer that dependency from an elite made up of landlords and employers to one made up of politicians and bureaucrats. Harlem is as completely a pocket borough as any ever was in the pre-1832 House of Commons, and its congressional seat is as thoroughly in the possession of Charles Rangel as any seat in the pre-1832 House of Commons was in that of some placeman chosen by the duke of Newcastle.

I am not impressed by Phil Agre's arguments. His claim that "conservatism is the domination of society by an aristocracy" ignores completely that the greatest apologist for elitism in American politics during the twentieth century was Walter Lippmann, who began his public life as a socialist and was the standardbearer of American liberalism for most of the rest of it. And if "a main goal in life of all aristocrats... is to pass on their positions of privilege to their children," then what nominally conservative political families have succeeded so well in this as the Kennedys, the Cuomos, the Daleys, and other prominent liberal Democrats? One might reply to Agre: "liberalism is the domination of society by a nomenklatura."

mnuez said...

What an awesome post!


On account perhaps of aspects of my own upbringing, I'm quite sympathetic to many conservative/traditional/religious principals so I too find it quite annoying how rampant cut-throat capitalism is somehow allowed to cloak itself in these titles that - could they speak - would have nothing to do with it.

Attempting to make a rational point about it to a self-described "Conservative" (or self-described Anything really) would just be a lesson in futility. Recall if you will that we live in a world where pretty much everybody (be they male in any case) gets all excited about the doings of some sports team or other. We are tribalists with working radios, nothing more. Catchphrases, flags, symbols and labels are far more important - and real - to most anyone than are ideas thought through from an unbiased perspective.

Zimri said...

Property tax is a rent levied by the state; populist attempts to rein that in, like "Proposition 13", are then rent control.

I agree with everything Michael said which I understand, and will therefore assume that Michael is correct about "copyhold" and old Scottish tenancy law.

It follows from the above two premises that the same argument must be levelled at Leftists who oppose(d) Prop 13. Which makes Agre the most blatant hypocrite mentioned in this blog post, since he's the person most fully documented here as raising the issue.

TGGP said...

I would be hard-pressed to think of a worse example for your point than the Russian revolution. Russia was actually modernizing in the period before the revolution. Revolutions rarely happen when a populace is truly mired in backwardness (as in North Korea) but rather when there is some disturbing dynamism and rising expectations.

Mike O'Malley said...

Let's see how that works Zimri. You say: "Property tax is a rent levied by the state; populist attempts to rein that in, like "Proposition 13", are then rent control.,

Hmmm, let's see, if you OWN a four unit multi-family home in New York City and you wished to enjoy the use of YOUR property by charging the going rate for an apartment. Now let's say you've got a tenant who represents that he has occupied that apparent since 1970, in which case the State of New York limits the amount of the rent you can charge and therefore the REVENUE and income you can earn on YOUR property.

OK, if you OWN four unit multi-family home in Oakland and you wished to enjoy the use of YOUR property by charging the going market rate for an apartment you can do so. You can also move your entire entended family into the four units to and your family can enjoy the use of YOUR property without charging rent. However, the State of California which does NOT OWN your four unit multi-family home wishes to raise the COST of your ownership of YOUR property, property which is NOT OWNED by the State of California, and the citizens of Califonia limit that tax increase on the property OWNED by YOU and NOT OWNED by the State of California ... yep! Flawless! I can't see a problem with your analogy Zimri! Can you?

Hey! Let's raise taxes and spend more money of public education because it like works so well!

mtraven said...

Michael: "what passes in the US for conservatism" is a mixture of regressives social stands, libertarian posturing, and aggressive militaristic statism (neoconservatism). Classical liberalism is given a lot of lip service but very little actual service.

But I agree, the shift in terminology is confusing in itself, without even considering the hypocrisy. I actually just read the Hayek essay you mention.

Rent control... comes more to resemble such old feudal tenures as copyhold in English law...

Yes, that was basically the insight that inspired this post.

I am not impressed by Phil Agre's arguments. His claim that "conservatism is the domination of society by an aristocracy" ignores completely that the greatest apologist for elitism in American politics...

Well, Agre's thesis is a bit too facile for me, but I find it is great for clearing away the obfuscation that surrounds the idea of conservatism, and does a fair job of articulating some counterprincipals and counterproposals.

There are always going to be elites of some kind in society, if only for the reason that a 300 million person direct democracy can't work. But there are elites that function mainly to serve and perpetuate themselves, and elites that serve the entire populace. There are also elites in the sense of a closed and privileged class, and an elite that is open at the bottom to the driven. Agre's idea of issue entrepeneurmanship is one picture of how this should work.

Liberal Democrats do have their nepotistic lineages, but this is a reflection of the facts of political life, rather than ideology -- name recognition is such a valuable political asset that it distorts the "market". But note that our last two Democratic presidents rose on their own energies from fairly humble origins.

Zimri: you are right that Prop 13 represents a market distortion somewhat similar to rent control, but it affects a different class of people. I don't know why you are calling Agre a hypocrite, he doesn't mention prop 13 or rent control anywhere in that document.

Michael said...

You will note that I qualified 'what passes in the U.S. for conservatism' by the words 'with respect to economics.' I suppose you could call it libertarian posturing, but classical liberalism was in fact what Hayek, Mises, Friedman, and just about every other economist ordinarily identified as conservative actually professed or professes.

The history of intermediate feudal tenures is not reassuring to the owners of rent-controlled properties. What happened in England between the passage of the statute Quia emptores in 1290, which began the abolition of feudalism there, and the Law of Property Act of 1925, which reduced estates in land either to freehold or leasehold, was that the ancient tenures were gradually converted into freeholds belonging to the former feudal vassals. The same was true of the abolition of feudal tenures in Scotland. There, the rights of feudal superiors had long been eroded but remained formally recognized in law into the present century, although they were ny then mere vestiges of what they had once been. My mother owned two superiorities in Lanark, and as I understand our solicitor, she still retains the right to compel her former feudatories or their successors to correct any subsidence due to the mine shafts underneath (an occasion that has not arisen), but the last feu duties (nominal rents) paid by them were compounded and paid off by 2006.

The reality of rent controls in New York is not the 'usual situation' you describe. It's my impression that a significant number of its beneficiaries are middle- or upper-middle-class renters who are able by virtue of it to live in Manhattan apartments at costs far below the uncontrolled market. These people are the real political constituency for the continuance of rent control in the city. Working-class New Yorkers mostly live in the other boroughs where they often do not benefit from rent controls. The indigent live in public-housing projects where their rents are subsidized rather than controlled.

I don't believe the left-liberal politico-bureaucratic elite is any less self-serving than the right-conservative landowning-financiall-industrial one. Nor is it any less exclusive or snobbish.

Maybe the liberal nomenklatura makes more show of its supposed sympathy for the downtrodden, but show is all it is. Look at Christopher Dodd - lining his pockets at the expense of the taxpayer, via sweetheard deals and campaign contributions from AIG, Fannie and Freddie, Countrywide Financial, etc. The phrase 'whited sepulchre' seems to have been made to measure for him. By contrast I have known three generations of a local industrialist's family, all of whom were very conservative politically, and who uniformly demonstrated, often without any publicity or even desire for it, remarkable stewardship and charity in my community.

As for snobbery, John Buchan's observation that while Conservatives may believe themselves better-born, Liberals think they are born better, is as true today as it was a century ago in Britain. We have only to recall Obama's condescending remarks about rural Pennsylvanians who 'clung to guns and religion,' and the chorus of derision directed at Sarah Palin from the liberal peanut gallery during the last presidential campaign. It did not have so much to do with her principles and positions as it did with her déclassé style. The working and lower-middle classes are fine people to have as constituents as long as they pay their union dues and trust the left-wing elite to do what is best for them - but heaven forfend that one should raise her distinctly non-U voice in public life, especially in contradiction of her betters. This is of course nothing new. The treatment of black conservatives like Clarence Thomas, Tom Sowell, or Walter Williams provides similar examples. How dare they not toe the liberal line? Such insolent, ungrateful, uppity n*****s!

mtraven said...

Michael:
You will note that I qualified 'what passes in the U.S. for conservatism' by the words 'with respect to economics.'
Yes, I noticed. Unfortunately conservatism comes as a package deal. Economic classical liberalism without the rest of it gives you the libertarian party, which is a negligible political force.



Maybe the liberal nomenklatura makes more show of its supposed sympathy for the downtrodden, but show is all it is. Look at Christopher Dodd...

I'm not the biggest fan of Dodd, or Democratic politicians in general. At the moment, they are the best we can hope for. Dodd, despite his minor-league corruption, has indeed done something for the "downtrodden", for instance sponsoring the Family Medical Leave Act.

You will note that the Agre paper uses the word "democratic" a lot, but always with a small "d" until the last section. The Democratic is an imperfect vehicle for realizing democratic values.

By contrast I have known three generations of a local industrialist's family, all of whom were very conservative politically, and who uniformly demonstrated, often without any publicity or even desire for it, remarkable stewardship and charity in my community.
Great. If conservatives could conserve on a national scale that would be wonderful, but they've demonstrated that they are nothing but wreckers, and they are (god willing) through.

We have only to recall Obama's condescending remarks about rural Pennsylvanians who 'clung to guns and religion,'

A wingnut-media-fueled shitstorm about nothing. It didn't work, maybe you should let it go.

and the chorus of derision directed at Sarah Palin from the liberal peanut gallery during the last presidential campaign. It did not have so much to do with her principles and positions as it did with her déclassé style.

It had to do with her quite obviouse lack of knowledge and competence (and utter lack of principles). Yes she got mocked for her rural style, but she was campaiging on that style pretty much exclusively so what do you expect? It was the Republican's choice to put forth as spokesmen laughably ignorant figures like Palin and Joe the Plumber, at a time when the country was obviously desperate for sane and intelligent leadership. They screwed the pooch and paid the price. Get over it. I always wondered why they didn't choose someone like Mike Huckabee, who is just as cornpone as Palin but with intelligence behind it, but they didn't ask for my advice.

but heaven forfend that one should raise her distinctly non-U voice in public life, especially in contradiction of her betters.
The career of Bill Clinton contradicts your picture. Clinton was very non-U, took a lot of crap for it from the Washington establishment (conservative and otherwise). He shrugged that off because of his popular appeal.

Note to you and others: I actually have real work to do this week, so responses may be late and sporadic. Feel free to talk amongst yourselves.

Michael said...

I wouldn't say that Bill Clinton took a 'lot of crap' for being 'very non-U." I suppose everyone from Arkansas is to some extent non-U, but Clinton was hardly a prole. He did after all attend Georgetown, was a Rhodes scholar, and took his law degree at Yale.

Such "crap" as he took was for his bald-faced lies (including perjury before a Federal grand jury) and utter lack of principle. Perhaps it is a recipe for political success in a rural, one-party state, such as Arkansas was when he began his political career, to tell different groups of people the things they want to hear, even if one contradicts the other. At the national level, scrutiny is greater and the contradictions become more readily evident. There is no doubt that Clinton exerted a great deal of charm over people - like any successful confidence-man. He always reminded me a bit of George Macdonald Fraser's character Sir Harry Flashman - a coward, bully, liar, and cheat, but endowed with enough intelligence and superficial amiability to extricate himself from any scrape, and come out smelling like a rose. The comparison is, though, perhaps unflattering to Flashman.

As for Clinton's "popular appeal" - it was such that he failed to win a majority of the popular vote in both 1992 and '96, and such that after his first two years in the White House, he lost control of Congress to the Republican party for the rest of his administration.

If Palin was "laughably ignorant" and demonstrated "quite obviouse [sic] lack of knowledge and competence," what have you to say for her opposite number, Joe Biden? He's had a long history of ignorant gaffes, but somehow they are forgiven and forgotten because he parrots the correct left-wing line.

"If conservatives could conserve on a national scale..." - There is at least some indication that they do. In 2006, Arthur C. Brooks, a professor at Syracuse University, published a book entitled "Who Really Cares: The Surprising Truth about Compassionate Conservatism." Brooks shows, inter alia, that although families identified as 'liberal' have incomes averaging 6 per cent hgher than those of families identified as 'conservative,' conservative-headed households give on average 30 per cent more to charity than do liberal-headed households. Conservatives also donate more time and more blood. Residents of states that voted for Kerry in 2004 gave smaller percentages of their income to charity than did residents of states that voted for Bush. Bush carried 24 of the 25 states where charitable giving was above average. People who reject the idea that 'government has a responsibility to reduce income inequality' give an average of four times more than people who accept the proposition.

By the way, an interesting example of a beneficiary of rent control - the point of departure for this discussion - is another candidate for the Order of the Whited Sepulchre, Charlie Rangel. According to his Wikipedia entry,

"The New York Times reported on July 10, 2008, that Rangel rents four apartments in the Lenox Terrace complex in Harlem at below-market rates. The newspaper reported that Rangel paid $3,894 monthly for all four apartments in 2007, but that the going rate for similar apartments offered by the landlord in that building would be as high as $8,125 monthly. Three adjacent apartments on the 16th floor were combined to make up his 2,500 square-foot home; a fourth unit on the 10th floor is used as a campaign office, even though that violates city and state regulations that require rent-stabilized apartments to be used as a primary residence. The apartments are in a building owned by the Olnick Organization. Rangel received thousands of dollars in campaign contributions from one of the company's owners, according to the Times. Rangel told the newspaper his rent does not affect his representation of his constituents.

"Congressional ethics experts cited by the Times indicated that the difference in rent between what Rangel was paying and market rates on the second, third, and fourth apartments he rented, an estimated $30,000 per year, could be construed as a gift as the savings is granted at the discretion of the landlord and is not offered to the public at large; if this should be treated as a gift, it would exceed the $100 limit established by the House of Representatives..."

Congressman Rangel simultaneously claimed a house on Colorado Ave. in Washington, D.C. as his primary residence for tax purposes even as he enjoyed below-market rents on his four rent-stabilized New York apartments. In September 2008, he also disclosed through his attorney, former Clinton apparatchik Lanny Davis, that over a number of years he had failed to report $75,000 in rental incomes from a villa he owns in the Dominican Republic resort at Punta Cana.

I recall that Congressman Rangel once described Republicans who wanted to cut taxes as 'racists,' since his black constituents largely benefitted by government expenditures, and tax cuts threatened those expenditures. It would be more appropriate to say that liberal Democrats like Rangel have no objection to raising taxes, because they have no intention of paying them.

And, when they get caught, there's no real consequence but having to write a check - like Daschle, Geithner, and others, Rangel has, beyond having to pay what he owed all along, suffered only a little embarrassment. I wonder how many small-business men without political connections would get away so easily.

The House last year, largely on party lines, tabled a resolution to censure Rangel, even though all evidence shows that he has intentionally and repeatedly engaged in serious breaches of ethics. There's a marked contrast between his treatment and that, say, of Trent Lott, who was relieved (by his own party) of his Senate leadership position, only because he was a bit too enthusiastic about wishing Strom Thurmond a happy 100th birthday.

mtraven said...

I don't see much point in debating the merits of Bill Clinton. I was never his bggest fan, but his successor made him appear in retrospect to be like unto a god.

Clinton was from a white trash background, developed some polish by getting into the Ivy League on his own, and used his ability to bridge those two worlds to great political effect. But he was more-or-less rejected by the Washington establishment, like David Broder who famously said "He came in here and he trashed the place, and it's not his place." In short, there is a snobbish establishment of the type you describe, but it is not especially left-wing.

You responded to "If conservatives could conserve on a national scale..." with some evidence about conservative contributions to charity, which is completely unrelated to what I'm talking about. I am talking about conservative governance, which has been an unmitigated disaster. Bush squandered Clinton's budget surpluses, ran up record deficits, plunged us into unneeded and ill-planned wars, politicized and sabotaged vital government functions...well, I could go on. To return to the theme of this posat, such a record is the opposite of "conservative" in the sense of actually conserving anything of value.

If Palin was "laughably ignorant" and demonstrated "quite obviouse [sic] lack of knowledge and competence," what have you to say for her opposite number, Joe Biden? He's had a long history of ignorant gaffes...

Gaffes are one thing, being unable to answer softball questions about what papers you read is something quite else. But I'll grant that Palin might not be quite as innately dumb as she appeared; and her problem might just have been being woefully unprepared for the national stage. If the Republicans were smart they would have trained her up for four years and deployed her in 2012 where she might have been a formidable candidate, but they used her up. Of course, if they were smart, they wouldn't be Republicans.

Mike O'Malley said...

MTraven wrote: Clinton was from a white trash background, developed some polish by getting into the Ivy League on his own

Oh My! Do you really think so? Pres. Clinton was a smart man, and rather sociopathic too boot. But he had a godfather, a guardian dark angel. Can you tell us who that necessary early mentor was?

Here is a hint: organized crime

Here is another hint: KKK

Michael said...

Clinton's father was a travelling salesman, his mother a nurse. In Arkansas (and much of fly-over country) that is middle-class, not white trash.

Anyway, we were talking about elites, and you tried to distinguish between "elites that mainly function to serve and perpetuate themselves, and elites that serve the entire populace." Do you really think that crooks like Dodd and Rangel "serve the entire populace"?

You are so eager to blame the current economic crisis on the system of private property and open markets that you fail - perhaps deliberately - to recognize that there is a difference between market capitalism, in which entrepreneurs having neither political favor nor handicap compete freely, and state capitalism, in which politicians dispense rent-seeking opportunities to favored constituents in return for bribes, kickbacks, or other more sophisticated forms of boodle.

The present economic collapse is a consequence of the latter sort of capitalism - the deliberate and distortive manipulation of markets in pursuit of a social and economic policy that conveniently benefits a significant number of heavyweight political players.

The crisis began in the housing market and was the direct product of the policies, dictated by politicians like Chris Dodd, to the mammoth GSEs, Fannie Mae and Freddie Mac, that caused large numbers of mortgages to be made against insufficient collateral to borrowers lacking sufficient capacity for repayment. It is beyond dispute that Fannie and Freddie dominated the secondary mortgage market, held or guaranteed the majority of residential mortgages in the United States, and issued securities backed by them. These were touted as safe investments with the implicit guarantee of the U.S. government behind them. Feeder companies like Angelo Mozilo's Countrywide Financial supplied them with mortgages made, in many cases using inflated appraisals, by store-front offices staffed by people who were essentially salesmen rather than experienced lending officers. This system set the standard that other participants in the mortgage business had to meet or beat, and - indeed - some were foolish enough to play the game.

Is it just a coincidence that Fannie and Freddie strategically gave contributions to politicians on the congressional committees having regulatory oversight of their activities - that Chris Dodd was in fact the recipient of the largest amounts given to any politician by either of them? That Barney Frank's one-time catamite Herb Moses was an executive at Fannie Mae? That, as the melt-down was a-brewing, Frank defended Fannie and Freddie, saying "These two entities... are not facing any kind of financial crisis... The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing" ?

As we now discover, it wasn't just Herb's fannie that got buggered! The fourth quarter 2008 operating loss of Fannie Mae alone was $25.2 billion. To give some idea of the relative scale, the total operating loss of all 8300 banks under FDIC supervision during the same period was $26.2 billion. I suppose you will excuse all this because these shenanigans "serve the entire populace." Serve it the dog's breakfast, that is.

Together with Mr. Frank, another prominent left-wing Democrat, Maxine Waters, made special pleadings for federal bail-out monies to be given to OneUnited Bank of Boston, Mass. The bank was heavily invested in the securities of Freddie Mac and Fannie Mae, and its resultant losses burned up almost all its capital. Rep. Waters's husband is a prominent stockholder and former director of the bank; the bank's executives were major contributors to her campaign. Is she, too, "serving the entire populace"? Or must we excuse and "empathize" with the boodling and peculation that is the stock in trade of liberal black politicians like her and Charlie Rangel, just as you urge us to do with thugs in the black welfare slums? They can't help it, I suppose, because some Simon Legree whupped their great-grandpappies' dusky backsides 150 years ago. I don't know whether to laugh or cry.

Mike O'Malley said...

Michael, that is a most excellent post. One can only hope that our host takes it to heart.

*


Time is short, so I'll have to offer an overly succinct, rough incomplete outline.


If one wishes to understand our current financial crisis one needs to revisit the past and consider the several previous administrations.

FDR:
During the Hoover administration the Federal Reserve Bank engaged in a sequence of irresponsible, reckless and contradictory policy changes leading up its determined refusal to make liquidity available to the market in the immediate aftermath of the October 1929 market panic; thereby turning a market adjustment into a crash. Pres. Hoover compounded this malfeasance by insisting upon balancing the Federal Budget and raised taxes during a recession. Before the dust cleared, the US banking system had collapsed under the pressures of default and deflation. The retirement savings of the nation had largely vanished.

FDR addressed this in a number of ways, some good, some bad and some very bad. Let's focus on two of FDR's “reforms”. First Social Security, which was based upon the design of Bismarck's and Mussolini's government run retirement systems (one of which had by then collapsed in high national debt and hyperinflation). FDR's Social Security system was not to be found actuarially sound. Moreover, it reduced the size of the US economy by around 5% pretty much since inception. It also eliminated substantially all of US private retirement savings by diverting a substantial portion of wages into government growth and patronage. This has made the US dependent on foreign sources of savings and investment for growth in the US economy; source such as Japan, China and oil producing regimes in the Middle East.

FDR also created Fannie Mae which undermined the profitability traditional banking and greatly expanded the role the US government in the US housing market.

LBJ:
LBJ in order to hide irresponsible and dangerous growth in US debt LBJ turned Fannie Mae into a massive Enron style off balance sheet risks with a “faux” privatization.

Carter
Signed the Community Reinvestment Act.


Clinton
The US Justice department, the Boston Fed and community activist groups, organizations and left wing attorneys (such as ACORN and Barrack Obama) used the Community Reinvestment Act to pressured initially reluctant banks into making massive amounts of unsound loans to high risk borrowers. Under the regulatory guidance of Andrew Cuomo at HUD, Fannie Mae and Freddie Mac, the two government sponsored enterprises that purchased and securitized mortgages, to devote a percentage of their lending to support affordable housing. In fact by October 2000, in order to expand the secondary market for affordable community-based mortgages and to increase liquidity for CRA-eligible loans, Fannie Mae committed to purchase and securitize $2 billion of "MyCommunityMortgage" loans. I recall that by the end of 2000 Fannie Mae and Freddie Mac had either purchased, securitized or guaranteed over $1 trillions of high risk sub-prime and Alt-A loans.


Bush
Fannie Mae, now under the control of Clinton Administration officials was discovered and charged by the Securities and Exchange Commission with using accounting fraud to hide no less than $10 billion of losses on bad mortgages and mortgage backed securities. The Bush Administration attempted to reform Fannie Mae and Freddie Mac but was thwarted by Democratic resistance in Congress. The Bush Administration then tried to reform Social Security and was thwarted by and the MainStream Media, Democrat resistance in Congress and Republican Congressional failure.

In the second quarter 2006, politically connected ultra-rich left wing radicals Herbert and Marion Sandler entered into a deal to sell their sub-prime and Alt-A mortgage lender, Golden West Financial, to Wachovia Bank for $24.3 billion. By the end of the third quarter of 2006 evidence began to appear that this huge Golden West Financial mortgage portfolio was in serious trouble. By the fourth quarter 2006 and the first and second quarter 2007 evidence began to appear that there were serious problems in other similar large sub-prime and Alt-A mortgage portfolios ...

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OK that is the roughest of outlines and poorly written but that's all the time I've got for now.

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Characterizing, Pres. Clinton's family as middle class is not quite accurate. His mother and adopting father were low lives, but they lived above the status of the local middle class because of their family connections. It might be more appropriate to characterize the extended family as local elite. Pres. Clinton received a high quality private education from pretty much the get-go on the dime, so to speak, of his dark mentor, KKK and organized crime associated “godfather”. Think of them as high-rollers associated with the Sopranos in an Arkansas setting instead of New Jersey. It is not surprising the Roger Clinton became the biggest coke dealer in Arkansas nor is it surprising that there is convincing evidence suggesting that his brother was an accomplished rapist.

I wonder if M Traven can identify this mentor/godfather figure.

goatchowder said...

I've heard rent control opposed because it's essentiall an massive transfer of wealth from the young to the old. In that sense, I'm not sure I love rent control so much. It's true: seniors can sit on their rent-controlled apartments, thus creating scarcity and making life hell for young people trying to afford an apartment.

An even worse artificial corruption of the market, which constitutes a massive transfer of wealth from the young to the old on a scale probably never before seen, is Proposition 13. Here's a system in which old folks can sit on their properties until they drop dead, creating a scaricty severe enough to make it impossible for young people to afford a house without mortaging themselves into idiotic speculative multiples of any sanely-obtainable income.

Everywhere else in the country, when you get too old to afford your property tax, you move in with your kids. In California, you live with your parents until you have kids. Then you stay until they die, so you can inherit the house (and its artificially-low property tax payments).

Wasn't it Warren Buffet who quipped that his property tax on his Nebraska rancher was more than the tax on his Malibu cliffside mansion? There ain't nothing conservative about Prop 13, except in that it starves the government of revenue, which today's "conservatives" seem united in zeal to do.

Mike O'Malley said...

Hello Goatchowder!

BTW: if you think that Prop 13 is a massive wealth transfer from the young to the elderly then you need to do some research on Social Security.




"In fiscal year 2005-06, the latest year for which comprehensive data are available, California's state and local governments collected nearly $164 billion in taxes, about $4,517 for every state resident. For the nation as a whole, average state and local tax collections were $4,001 per capita. In other large states, taxes per capita amounted to $6,413 in New York, $4,081 in Illinois, $3,693 in Florida, and $3,235 in Texas. By this metric, California ranked 10th in the nation.

State and local governments also raise revenues from fees, charges, special assessments, and other sources. Taken together, California's taxes, fees, and other general revenues were about $237 billion, or $6,528 per capita in fiscal year 2005-06, compared to $5,803 in the nation as a whole. In terms of its overall revenue burden, California also ranked 10th in the nation"

It sure doesn't look as though the government of the state of California is being "starved" for revenue. Perhaps California's problems are really on the debit side (expenditures) of its statement of operations.

Anonymous said...

Since I live in rent controlled Manhattan apartment and am therefore an object of theoretical rage for Hayek, Friedman, Nozick, etc. devotees I appreciate all of these thoughtful comments. It seems pretty clear that the terms liberal and conservative are becoming more and more outmoded. The concepts of preservation and libertarianism are probably more suitable. Preservation of any sort, whether of ideas, species, buildings, or cultures, has a deep human value that is inimical to the process of capital investment and accumulation. The rent controlled tenant is in the situation of a Spotted Owl. I am defending my own self-interests. But I am also objecting to the idea that all values should be reducible to rate of return (ROI) on investment. ROI is not ultimately a natural, humane, stable, or rational system of social organization. Rent control simply places some value on longevity, thus preserving a cultural stability in the manner defended by conservative critics of capitalism, from Burke to Carlyle. American conservatism is really an incoherent hodgepodge of libertarianism, sadism, fantasy, and various forms of business self-interest. Its closest historical parallel is the urban machine politics of the 19th century, a system of collusion, profit, bullying, nationalism, and spoils grasping at any convenient doctrine that serves the vested powers. It is intellectually and morally disgusting, and politically quite dangerous, as are all appeals to inner ape.

Mike O'Malley said...

Anonymous (who states a vested interest in living off of someone else's dime by way to NYC rent control) projects a fantasty: American conservatism is really an incoherent hodgepodge of libertarianism, sadism, fantasy, and various forms of business self-interest. Its closest historical parallel is the urban machine politics of the 19th century, a system of collusion, profit, bullying, nationalism, and spoils grasping at any convenient doctrine that serves the vested powersSubstitute the term "political corruption" for "libertarianism" above and one has a reasonable characterization to the one party corruptocrat Chicago political world from which our current President benefited and emerged.

One need only consider that the urban political machine of the 19th, 20th and now 21st centuries are invariably Democrat Party urban political machines.

mtraven said...

Anonymous, I'm glad somebody got the point I was trying to make. American conservatism is really an incoherent hodgepodge of libertarianism, sadism, fantasy, and various forms of business self-interest.: That's excellent, but you left out religous hysteria (most visible right now in the gay-marriage counter-movement). Also, the non-religious paranoia exemplified today by Glen Beck's teabaggers and gun fondlers, but going back much further.

mtraven said...

Michael: your ability to veer off into long diatribes about your own obsessions is a wonder to behold, but of no interest to me, so consider most of your last comment ignored. The link between Kinsey and Crowley was new to me, and vaguely interesting, although what it has to do with the history of the left is unclear.

There was nothing totalitarian about kibbutzim, which were a voluntary movement. So what the fuck are you talking about?

And speaking of this tribe - if Pelosi et al. do not detest the institutions of our civil society, why then do they cosy up to dictators like Castro and Chavez? Again, what the fuck are you talking about?

Elián González was sent back to Cuba to be with his father. I thought you were arguing on behalf of the patriarchical family? But apparently you are all too willing to let family ties be sundered by the state if it suits your political purposes.