You Got to Be Kidding Me!

Learning Something

Posted in 2008 Election, Economics, Politics by Stacy McMahon on August 20, 2008

As the saying goes, a smart person learns from their own mistakes; a wise person learns from the mistakes of others. After the last couple years of bad financial news, it looks like there may be some wisdom out there afterall. Amity Shlaes in the Washington Post reminds us of some historical pitfalls in government responses to economic crisis. There are the usual suspects – tax hikes, protectionist trade policies, Wall Street-bashing and bailing out companies “too big to fail” (like Fannie Mae) and then there’s an interesting addition – the negative impression created on foreign players when a grown-up country responds to problems with policies everyone knows are wrong.

FDR spoke of “bold persistent experimentation.” Obama speaks of “change.” Both can do damage. What’s more, the list of experiments is always finite. Our bailouts look reassuring, but even Washington cannot rescue the entire economy. And foreign investors wonder where Washington will stop. Already concerned about the inconsistent dollar policy, China is now troubled by the inconsistent rescues.

Between McCain and Obama I don’t have much hope at this point that we’ll avoid dumb populist policies in the next decade, but here’s a ray of sunshine from no less than the industry whose collective asshattery brought us to where we are now (emphasis mine):

Over the past 18 months, the mortgage market has changed more rapidly than in any comparable period since the Great Depression. From the standpoint of borrowers, two changes are of paramount importance. The first is an increase in day-to-day price volatility. The second is a tightening of underwriting requirements, with higher down payment requirements the centerpiece.

Update: Andrew Sullivan anecdotally confirms that real credit requirements have really been implemented, for really real.

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