Dead Cat Bounce - Road to the Middle Class

AFTER TWO days soaring, stocks turned lower again today, with the Dow down 372.75 or 3.25 percent at the close. They say that the third day after a bounce is the key to a sustained rally, so it looks like there is more to come on the bad news front.

When things turn south, we read in the books, the key is to find a scapegoat and sacrifice it. Since all this bad stuff happened on Bush’s watch it goes without saying that he is to blame.

But since Bush will soon be out of office, it seems hardly satisfying to give him the entire blame for the mortgage meltdown and the Fannie/Freddie meltdown and the Wall Street investment bank meltdom and doubtless more meltdowns to come.

I know, let’s blame the Democrats! Kevin Hassett from the American Enterprise Institute has the goods on them.

Back in 2005 responsible Republicans introduced S.190 in the United States Senate. It would have curbed Fannie and Freddie and maybe averted the meltdown. But Democrats were united in opposition.

Of course it had nothing to do with the money that Democrats were getting from Fannie/Freddie. Oh no. Even though Hassett writes that Sen. Barack Obama (D-IL) was one of the prime beneficiaries of Fannie/Freddie money.

Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.

That’s right. Chairman Dodd. He was a mere ranking Democrat in 2005, but the Senate changed hands in 2006. Don’t expect much from Chairman Dodd on the Fannie/Freddie reform front, not unless Secretary Paulson puts a gun to his head. Especially since Dodd was a “Friend of Angelo” at Countrywide Financial.

But the larger issue is to think back over the years of Fannie/Freddie excess. Was it really doing their low-income homeowner constituents a favor for Democrats to sluice money at housing? Wouldn’t they be better off if there had been no subsidies and no big runup in home prices? Wouldn’t they be better off if house prices weren’t in free fall right now?

The tragedy is that Democrats still don’t seem to have learned their lesson. At least not Barney Frank, the counterpart to Dodd in the House, according to the Wall Street Journal.

Fan and Fred’s patrons on Capitol Hill didn’t care about the risks inherent in their combined trillion-dollar-plus mortgage portfolios, so long as they helped meet political goals on housing. Even after taxpayers have had to pick up a bailout tab that may grow as large as $200 billion, House Financial Services Chairman Barney Frank still won’t back a reduction in their mortgage portfolios.

It’s the trouble with the whole welfare state model. You think you are helping the poor by sluicing out subsidies. But you only end up wrecking their families, failing to educate their children, and enticing them into buying more house than they can afford.

But at least you get their votes.

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Christopher Chantrill blogs at www.roadtothemiddleclass.com. His Road to the Middle Class is forthcoming.

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Action

The incentive that impels a man to act is always some uneasiness... But to make a man act [he must have] the expectation that purposeful behavior has the power to remove or at least to alleviate the felt uneasiness.
Ludwig von Mises, Human Action

Chappies

“But I saw a man yesterday who knows a fellow who had it from a chappie that said that Urquhart had been dipping himself a bit recklessly off the deep end.” —Freddy Arbuthnot
Dorothy L. Sayers, Strong Poison

China and Christianity

At first, we thought [the power of the West] was because you had more powerful guns than we had. Then we thought it was because you had the best political system. Next we focused on your economic system. But in the past twenty years, we have realized that the heart of your culture is your religion: Christianity.
David Aikman, Jesus in Beijing

Churches

[In the] higher Christian churches� they saunter through the liturgy like Mohawks along a string of scaffolding who have long since forgotten their danger. If God were to blast such a service to bits, the congregation would be, I believe, genuinely shocked. But in the low churches you expect it every minute.
Annie Dillard, Holy the Firm

Civil Society

“Civil Society”—a complex welter of intermediate institutions, including businesses, voluntary associations, educational institutions, clubs, unions, media, charities, and churches—builds, in turn, on the family, the primary instrument by which people are socialized into their culture and given the skills that allow them to live in broader society and through which the values and knowledge of that society are transmitted across the generations.
Francis Fukuyama, Trust

Class War

In England there were always two sharply opposed middle classes, the academic middle class and the commercial middle class. In the nineteenth century, the academic middle class won the battle for power and status... Then came the triumph of Margaret Thatcher... The academics lost their power and prestige and... have been gloomy ever since.
Freeman Dyson, “The Scientist as Rebel”

Conservatism

Conservatism is the philosophy of society. Its ethic is fraternity and its characteristic is authority — the non-coercive social persuasion which operates in a family or a community. It says ‘we should...’.
Danny Kruger, On Fraternity

Conservatism's Holy Grail

What distinguishes true Conservatism from the rest, and from the Blair project, is the belief in more personal freedom and more market freedom, along with less state intervention... The true Third Way is the Holy Grail of Tory politics today - compassion and community without compulsion.
Minette Marrin, The Daily Telegraph

Conversion

“When we received Christ,” Phil added, “all of a sudden we now had a rule book to go by, and when we had problems the preacher was right there to give us the answers.”
James M. Ault, Jr., Spirit and Flesh

Democratic Capitalism

I mean three systems in one: a predominantly market economy; a polity respectful of the rights of the individual to life, liberty, and the pursuit of happiness; and a system of cultural institutions moved by ideals of liberty and justice for all. In short, three dynamic and converging systems functioning as one: a democratic polity, an economy based on markets and incentives, and a moral-cultural system which is plural and, in the largest sense, liberal.
Michael Novak, The Spirit of Democratic Capitalism

Drang nach Osten

There was nothing new about the Frankish drive to the east... [let] us recall that the continuance of their rule depended upon regular, successful, predatory warfare.
Richard Fletcher, The Barbarian Conversion

Education

“We have met with families in which for weeks together, not an article of sustenance but potatoes had been used; yet for every child the hard-earned sum was provided to send them to school.”
E. G. West, Education and the State

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