Uncle Orson Gets a Shout Out from the King of Crazy Talk

Unlce Orson is pretty proud, and rightfully so. One of his columns was mentioned by the King of Crazy Talk himself, Rush Limbaugh. Rush describes Uncle Orson as a liberal Democrat (because he supports gun control) and then reprints dear uncle's entire column titled "Would the Last Honest Reporter Turn the Lights Out." I guess Rush's point is that even a blind squirrel finds a nut sometimes. In this case the "blind squirrel" is Uncle Orson and the"nut" is pure nuttiness.

You see, Uncle Orson buys hook line and sinker into the myth of the liberal media.  A lot of people do, and in some cases they might be right. But like Al Franken said: saying the media has a liberal bias is like saying Al Qaeda puts too much garlic in their hummus; even if its true that is not the real problem with AL Qaeda. Franken goes on to describe how the real problem with the media is bias toward their corporate owners (Viacom and GE for example, whose boards are not exactly known for their liberal bias), and bias to keeping access to politicians, and bias to laziness by simply reporting what somebody else has reported. But you can read Franken's book yourself. 

Uncle Orson asserts in his column that the media is dishonest because it hasn't reported that the cause of the current economic collapse is the fact that the democrats in congress forced Fannie Mae and Freddie Mac to make risky loans to poor people, and that the republicans - McCain, in particular - saw this coming and tried to prevent it, but the Democrats blocked all attempts at reform.

It is true that Fannie and Freddie were were allowed to loosen their lending practices and this contributed to the crisis. One problem with Uncle Orson's argument is that I know this because I learned it from the mainstream "Liberal" media.

The Truth about Fannie and Freddie 

While Fannie and Freddie did loosen their lending standards they never got into the worst of the "toxic" loans. A sub-prime loan is by definition a loan that does not meet the standards of Fannie and Freddie. They did buy some pretty bad paper in the "Alt-A" category, but they didn't buy the NINA (no income and no asset verification) loans and exotic interest-only ARM loans. Other companies bought those. In fact, if Fannie and Freddie hadn't bought the loans that they did, somebody else would have. They actually came kind of late to the mortgage orgy. The reason they wanted to loosen the standards is because they were losing market share to the other big (and private) mortgage buyers. The guys that were buying the really toxic stuff would have been more than happy to buy the Alt-A stuff Fannie and Freddie were picking up. In other words, the mortgage crisis would have happened no matter what Fannie and Freddie did.

The truth about Republican attempts to prevent the crisis. 

It is true that some republicans proposed the Federal Housing Enterprise Regulatory Reform Act of 2005 bill to rein in Fannie and Freddie and that Barney Frank opposed the bill. But the republican controlled congress never brought the bill up for a vote. So the Democrates didn't have the chance to vote against it or filibuster. What's more, John McCain signed on to the bill only two months before the housing bubble collapsed. His efforts would have done nothing to actually prevent Fannie and Freddie from buying risky mortgages, because they had already been bought. McCain even said he didn't see it coming before he said he did see it coming.

Uncle Orson calls the media dishonest because they didn't report the story the way he would have liked it reported, but his version of the story just isn't true. So who is to blame? Well Alan Greenspan blames himself. I think FactCheck.org does a pretty good job of summing up who is responsible:
So who is to blame? There's plenty of blame to go around, and it doesn't fasten only on one party or even mainly on what Washington did or didn't do. As The Economist magazine noted recently, the problem is one of "layered irresponsibility ... with hard-working homeowners and billionaire villains each playing a role." Here's a partial list of those alleged to be at fault:

• The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap.
• Home buyers, who took advantage of easy credit to bid up the prices of homes excessively.
• Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses.
• Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes.
• The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families.
• Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates.
• Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages.
• Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral.
• The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market.
• An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic.
• Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up.