News media people, often plagued with little understanding, fail miserably in their duty to inform the public. This is particularly evident in their reporting on the current financial meltdown, suggesting it was caused by deregulation and free markets.
Professor David Henderson, research fellow at Stanford's Hoover Institution, writes about regulation in "Are We Ailing From Too Much Deregulation?" in Cato Policy Report (November/December 2008). The Federal Register, which lists new regulations, annually averaged 72,844 pages between 1977 and 1980. During the Reagan years, the average fell to 54,335. During the Bush I years, they rose to 59,527, to 71,590 during the Clinton years and rose to a record of 75,526 during the Bush II years. Employees in government regulatory agencies grew from 146,139 in 1980 to 238,351 in 2007, a 63 percent increase. In the banking and finance industries, regulatory spending between 1980 and 2007 almost tripled, rising from $725 million to $2.07 billion. So here's my question: What are we to make of congressmen, talking heads and news media people who tell us the financial meltdown is a result of deregulation and free markets? Are they ignorant, stupid or venal?
A New York Times article, "Fannie Mae Eases Credit To Aid Mortgage Lending" (9/30/99), reported, "Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people …" The pressure was the 1977 Community Reinvestment Act that was beefed up during the Clinton Administration. It required banks to make high-risk loans they would not have otherwise made. Failure to comply meant fines and difficulty in getting approval for mergers and branch expansion.
One-third of the $15 trillion of mortgages in existence in 2008 are owned, or securitized by Fannie Mae, Freddie Mac, Ginnie Mae, the Federal Housing and the Veterans Administration. Wall Street buyers of repackaged loans didn't mind buying risky paper because they assumed that they would be guaranteed by the federal government: read bailout from the taxpayers. Today's housing mess can be laid directly at the feet of Congress and the White House.
What kind of assumptions do politicians and news media make about the intelligence of Americans to expect us to buy the idea that our current mess results from deregulation and free markets? I do not find that assumption flattering.