Anti-Obama downballot boomerang?

A mostly political Weblog.
Oct. 14 2008 6:11 AM

Anti-Obama Boomerang?

Why more votes for McCain might mean more Dems in Congress.

(Continued from Page 86)

Could Mozilo have done his subprime thing without Johnson and Fannie Mae as a backup to purchase his junky mortgages?

P.S.: Krugman suggests Fannie's problem is that it wasn't a true government agency, but rather a hybrid public/private partnership that privatized profits and socialized losses.

Liberals like Fannie the way it was for the first 30 years — a purely public enterprise.

Good point--according to Smith Fannie seems to have been using all sorts of tricks to turn profits using its implicit government credit guarantee.But if Fannie had been a pure government enterprise, would it really have refrained from supporting Mozilo-style subprime lending? I'm not so sure. Providing "affordable housing" was a policy crusade of Johnson, among others, and a popular goal on Capitol Hill (where Mozilo had done so much to ensure that his "friends" would be receptive to his particular method of pursuing affordability).

P.P.S.: Krugman also writes, boldly:

You could say that the Fannie-Freddie experience shows that regulation works.

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You could say that--unless you read the remainder of Krugman's column, which notes the inadequate capital requirements imposed on Fannie-Freddie because 

the companies' management bought off the political process, systematically hiring influential figures from both parties.

P.P.P.S.: Is this risk of corruption any less with a) "purely public enterprise" than with b) a public-private hybrid like Fannie Mae or c) a purely private enterprise (like, say, the Blackstone Group)? Interesting question. I would think well-connected liberal operatives like Johnson would be capable of at least perverting a regulatory regime even if they headed a 100% federal, civil-servicized Fannie Mae. (Most "regulation" is in category (c) of course, where the risk of corruption seems somehow undiminished by the triumphant "Fannie-Freddie experience.") ...

Update: See semi-clarifying semi-correction. ...  2:00 P.M.

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