Debra J. Saunders
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The collapse of MF Global Holdings gives Americans yet another reason not to trust Wall Street. The firm filed for bankruptcy as federal regulators were looking for $600 million missing from customer accounts. Its CEO, former Democratic New Jersey Gov. Jon Corzine, had bet that European leaders would bail out smallish countries that were too big to fail. His bet did not pay off.

The only good news out of this story is that Washington won't be bailing out MF Global. Corzine said he won't take a reported $12 million in severance. If he truly wants to atone, then Corzine might dedicate himself to cleaning up after Occupy Wall Street activists. To use their lingo, let the 1 percent tidy up after the 99 percent.

Occupy Wall Street's "unofficial de facto" website boasts that its New York financial district encampment strikes a blow "against the corrosive power of major banks and multinational corporations over the democratic process, and the role of Wall Street in creating an economic collapse that has caused the greatest recession in generations."

What's missing from this picture? An understanding of the starring role Washington played in creating the housing bubble that, when it burst, jammed up the U.S. economy.

Wall Street greed and hubris resulted in the $700 billion TARP bailout -- with $309 billion going to banks and financial institutions -- during the George W. Bush administration.

But the housing bubble was hatched thanks to President Clinton's well-intended plan to boost American homeownership. As Gretchen Morgenson and Joshua Rosner wrote in their book, "Reckless Endangerment," Clinton's "Partners in Homeownership wound up decimating the middle class."

Bowing to Washington, banks dropped traditional down payments and longstanding underwriting criteria. More people could afford to buy homes. Home prices rose past the point the market could bear.

The banks did not act alone. Government-sponsored entities Fannie Mae and Freddie Mac were great enablers -- the government's contribution to crony capitalism.

Banks have repaid most of the TARP bailout. As a result, the expected tab to taxpayers, according to Investors Business Daily, could be as little as $19 billion. But the Fannie and Freddie bailouts have cost U.S. taxpayers close to $170 billion.

On Wednesday, a splinter group of Occupy Wall Street began a two-week walk to Washington, D.C. If activists want to fight corrosive power, they might want to set their sights on Fannie Mae and Freddie Mac.

Last week, Politico reported that the Federal Housing Finance Agency paid $13 million in bonuses to 10 Fannie and Freddie executives. It's true that Fannie and Freddie bigs are making 40 percent less than the bygone execs who drove their organizations into conservatorship. But with Freddie reporting a $4.4 billion loss for the past quarter, bonuses hardly seem in order.

The problem with these government-supported entities is that, with Washington serving as the deepest of deep pockets, there's no such thing as failure.

Congressional Republicans and Democrats have moved to block further bonuses. Of course, they'll hold hearings -- just to show how indignant they are.

But they're not likely to do anything about the corrosive forces that fueled Fannie and Freddie. Boosters were able to claim that Fannie and Freddie could open the door to broader homeownership -- at no cost to taxpayers. When the bill finally arrived, it was too big to stop.

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Debra J. Saunders


 
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