Liberalism, Democrats and the Financial Meltdown

Liberalism is a many splendored thing.  It conjures up utopian visions that dazzle and mesmerize; it offers up convenient villains for ridicule and scorn (who are then called upon to shoulder the cost of their proposals); and it succeeds in concealing the consequences of its grand designs in the mist and haze of future generations - by which time it is impossible to identify the source of the unfolding disaster.

There has been an array of such examples of Liberalism's noble intentions, its courtship of various voter sets, and its uncanny deftness at evading notice for the calamities it has visited upon us decades later.

In the beginning, there was the Depression, a time of epic national crisis, from which emerged the New Deal, modern Liberalism's genesis.  Here, the Roosevelt Administration put forth an expanded government role for lifting the economy through federal jobs, public works, regulations, subsidies, and taxes: an “alphabet soup” of programs (FDIC, SEC, FHA, PWA, TVA, NLRB, WPA, etc).

Yet none of these efforts achieved the goal of ending the Depression, rather, many have argued, they prolonged it.  In 1933, unemployment was 25%; in 1939, it hovered above 17%.  The stock market did not recover its 1929 levels until the 1950s.

Worse, it created a new governing paradigm that has been hewed to fervently since: carving up the electorate into large “client” constituent groups (farmers, unions, retirees, etc) to be bought through federal programs and entitlements.

This had the effect of undermining traditional patterns of federalism and private initiative that had always defined the country; it placed the national government at the center of civic life, a position from which it has never looked back.  The central government has now grown to grotesque proportions, consuming three trillion tax dollars annually and still unable to manage itself, balance its budget, or resist pursuing further misguided adventures in social engineering.

The next bold leap in Liberalism's march through our nation's institutions occurred in the Sixties, when the “War on Poverty” endeavored to lift the underclass through a raft of wealth redistribution efforts that, despite trillions spent, have not diminished poverty a jot; they did, however, succeed in creating more government “clients,” and certain other less salutary outcomes, chief of which has been the disintegration of the American family, especially within the black community.  With government as Daddy, there was no apparent need for the real one, and illegitimacy and divorce rates have soared, creating more poverty, dysfunction, and dependency.

The next move toward Utopia through government meddling (with crushing impact on the nation today), occurred with the passage of the “Community Reinvestment Act,” another liberal enterprise.  Started in 1977 during the Carter Administration and expanded during the Clinton years, CRA strove to increase home ownership among the “poor” and minorities: on its surface, a laudable, however impractical, goal.  Yet, when the government forced banks to abandon standard lending practices to pursue such social fantasies, disaster, once again, beckoned.  Credit institutions (under pressure from Washington to be “CRA compliant”) developed “innovative” strategies to extend loans to unqualified borrowers including no down payments, adjustable rate mortgages (ARMs), and the elimination of income requirements.  Fannie Mae and Freddie Mac, the two mortgage behemoths and pet programs of the Democrats (the “Government Sponsored Enterprises,” or GSEs), were required to increase their portfolio of “affordable” (subprime) loans and so bought, bundled, and sold the toxic mortgages to investors and banks around the country (and world); this ensured a systemic credit meltdown, once the housing bubble burst, replete with a plunging stock market, ruined pensions, lost jobs, and massive bailouts: courtesy of Liberal nostrums foisted upon the financial sector - and the nation. 

Yet one rarely hears this narrative today.  Instead one learns only of “deregulation” or “Bush policies,” which effectively target the other side, but actually have little to do with the event.  And, amazingly, despite their pivotal role, the Democrats have avoided culpability.  But the heart of this economic collapse is Liberalism writ large: implausible policies, social pipedreams, unintended consequences evolving over generations. 

Yes, we can speak of “Wall Street greed,” or “predatory lenders,” as the media has done ad nauseam; but without Fannie and Freddie, the CRA, and Democrat policies ordering banks to make risky loans to minorities, whether they could afford them or not, there would be no subprime crisis.  By seeking to expand home ownership among the poor through government mandate and intimidation, liberals managed to wreck the economy instead.

There is something almost Zen-like in observing Liberalism at work: its captains imposing their paradisal visions upon us, to much applause and adulation, rendering the bleakest of harvests only years later, as they sail blithely along, unscathed.