How the Left Wing Created the Credit Crisis. Yes, Indeed!

James Grant is a knowledgeable student of the credit system, but today he goes off the rails, blaming the left wing for the credit crisis. Here is the most striking passage:

“By and by, the lefties carried the day. They got their government-controlled money (the Federal Reserve opened for business in 1914), and their government-directed credit (Fannie Mae and the Federal Home Loan Banks were creatures of Great Depression No. 2; Freddie Mac came along in 1970). In 1971, they got their pure paper dollar. So today, the Fed can print all the dollars it deems expedient and the unwell federal mortgage giants, Fannie Mae and Freddie Mac, combine for $1.5 trillion in on-balance sheet mortgage assets and dominate the business of mortgage origination (in the fourth quarter of last year, private lenders garnered all of a 19% market share).”

Grant, James. 2008. “Why No Outrage?” Wall Street Journal (19 July): p. W 1.

http://online.wsj.com/article/SB121642367125066615.html?mod=todays_us_weekend_journal

Would a publically owned agency have behaved the same way, lowering standards to increase share costs?

5 comments so far

  1. Martin on

    State intervention or activity in the economy equals socialism (the left). That includes the Federal Reserve.

    Strange that someone as sharp as Grant should regress to this level.

    He should read a little early Kolko, as well as Sam Dolgoff on the Spanish anarchist collectives.

    Perhaps he’s gagging on where the right has taken the country, and falling back on points first made in the freshman dorm debates of his youth.

  2. Thomas Molitor on

    I wouldn’t call either Henry Paulson or Ben Bernanke lefties but if you follow a conservative’s definition of a leftie as one whom espouses a philosophy that puts the American economic system at risk then it appears Bernanke and Paulson are the most dangerous subversive duo of all time. Paulson states he is for a “strong dollar policy” and then flies to Asia and begs the Chinese and Japanese to strengthen their currencies against the dollar. The American central bank is a disaster, causing huge inflation not just in the US but in the world through its dollar debasement policies. It’s obvious the Federal Reserve has given up on the dollar. If Bernanke prints money any faster the world will run out of trees. Never in history has a country solved its economic problems by debasing its currency.

  3. mperelman on

    The currency problems reflect a weak productive sector. Obviously that cannot be remedied my currency manipulation.

  4. Ed Darrell on

    I should probably know who James Grant is, yes?

    In this excerpt, he just sounds like one of Monty Python’s raving lunatics. Do his credentials rescue him from that?

  5. mperelman on

    Monty Python,I like that. thanks.


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