PAUL KRUGMAN: Joe Nocera Gets Mad

December 24, 2011, 8:37 AM
And it’s a beautiful thing to see.
Today Joe once again goes after the Big Lie — the claim that Fannie and Freddie caused the crisis — and drives home the point that the people advancing this story aren’t just wrong but are acting with intent, engaged in deliberate deception:
In Wallison’s article, he claimed that the charges brought by the Securities and Exchange Commission against six former Fannie and Freddie executives last week prove him right. This is another favorite tactic: He takes a victory lap whenever events cast Fannie and Freddie in a bad light. Rarely, however, has his intellectual dishonesty been on such vivid display. In fact, what the S.E.C.’s allegations show is that the Big Lie is, well, a lie.
Read the whole thing.
Basically, Joe is arriving where I’ve been since 2000: what’s going on in the discussion of economic affairs (and other matters, like justifications for war) isn’t just a case where different people look at the same facts but reach different conclusions. Instead, we’re looking at a situation in which one side of the debate just isn’t interested in the truth, in which alleged scholarship is actually just propaganda.
Saying this, of course, gets you declared “shrill”, denounced as partisan; you’re supposed to pretend that we’re having a civilized discussion between people with good intentions. And you’re supposed to match each attack on Republicans with an attack on Democrats, as if the mendacity were equal on both sides. Sorry, but it isn’t. Democrats aren’t angels; they’re human and sometimes corrupt — but they don’t operate a lie machine 24/7 the way modern Republicans do.
Welcome to my world, Joe.


Share your thoughts.
  1. Granted, Fannie and Freddie didn't "cause the crisis" in the sense you and Joe mean--still Fannie and Freddie were (as you have previously acknowledged to your credit) deeply corrupt to the core. Don't let your disputes with AEI ever let you, or anyone else, overlook or forget this FACT!
      • Rickstersherpa
      • Orange County, VA
      On a related topic, the Mainstream Media and all the VSPs have adopted the Polifact meme that the Ryan Plan to end Medicare, when properly charged that way, is the "Lie of the Year." I saw a guy from "Roll Call" repeat it on the Alex Witt show on MSNBC this morning. Of course it goes away for those lucky duckies born after 1956 but that apparently does not count. They should be happy to pay taxes for a benefit they will never receive!!! Mike Konzal at Rortybomb made the following comment about this point of view:

      "...Democrats are in the wrong when they attack the plan for its effects on seniors, because current seniors won’t be impacted. They show ads with elderly people, but no current elderly people will fact the Ryan plan.

      If anything was to show how much certain elite media go along with the Republican thought that the social safety net is only for people born in 1956 or earlier, while everyone else is on their own, this is it. Because I’m a senior-in-waiting, and this plan will affect me. Someday I’ll be elderly, and then I’ll have to deal with taking a worthless coupon to the notoriously ugly healthcare market if this plan passes. This is not semantics – it’s the basis of the inter-generational social contract. But in the worldview of Politifact, as long as the Great Society’s social insurance plan is there for people born in 1956 or earlier, it exists for everyone."
        • Ginger Mayerson
        • Los Angeles, CA
        I blame most of this crisis on the repeal of the Glass–Steagall Act by the Gramm–Leach–Bliley Act in 1999 on the idea that things change and the banks weren't going to crash the economy again. Yeah... Things change, but moral hazard and the evils of deregulation go on forever...until there's enough regulation to keep moral hazard in check.

        And, yeah, Republicans since Reagan are scary. It's not just that they're out to succeed, it seems to me that they're out to destroy anything or anyone that isn't them. Yikes.
          • Jake Wagner
          • Santa Barbara, CA
          Let's face it---shrill is what sells newspapers, whether it be the WSJ or the NY Times. Although Joe Nocera's analysis may be mostly on target, he is fighting a lost battle in which many Democrats fought on the wrong side. Subprime mortgages were certainly an important ingredient in the financial crisis, but the actions of the large investment banks were even more egregious.

          When the financial crisis was still young, many books (such as Andrew Ross Sorkin's Too Big to Fail) came out describing the role of the large investment banks. What came out of this was the realization among many Americans that insider trading (a crime which had presumably tripped up Martha Stewart) was only prosecuted when it involved ordinary stocks and bonds, not the complicated proprietary derivatives that had been designed by the big banks.

          When Obama came to power, I foolishly expected that there would be some calling to account of the big banks. After all, trillions of dollars of American wealth in housing equity and retirement accounts had been wiped out by insider trading run amok. The stewards of retirement funds had been bamboozled by new financial instruments, designed by the big banks who then betted against their own creations.

          But Obama and Holder had other priorities. Unlike the former CEO's of Enron, the heads of the big banks were never even prosecuted! So why should we be surprised that history is now rewritten to protect the guilty?
            • Nick Batzdorf
            • Los Angeles, CA
            The other angle to this lie is equally ugly: racism.
              • AMR
              • Emeryville, CA
              Fannie and Freddie were foolish
              Along with the FHA
              But Goldie grew fat and ghoulish
              While Congri looked the other way

              They sat 'round the bargaining table
              Sweeping crumbs onto the floor
              We need to construct a new fable
              Before citizens break down our door

              We need a fall guy so we can go free
              They stared at Fannie and Freddie
              We need a story to repeat on TV
              So they won't suspect Goldie or Citi

              Let's blame it all on socialism
              Tell them that's where they went off track
              We'll use big lies and hypnotism
              To finally get them off our back
                • Ron
                • New York, NY
                Such incredible nonsense. Had Fannie Mae stuck to the tried and true (20% down payment or 10% down with "A" credit and purchase mortgage insurance), do you honestly believe we would be in the mess that we are in today?

                Yes, the fire was burning, but Fannie Mae threw gasoline on it. Don't have steady job? No problem. Just state your income and we'll give you 90% financing. It was called the "Alt A" mortgage, and it was Fannie's specialty.

                Stop calling everyone who disagrees with you a liar.
                  • Staccato
                  • NyNy
                  Never fear, that is what we have Politifact for, to expose such nonesense. ^)
                  1. I lived in the industry during the crisis. It was not Fannie and Freddie. It was mortgage bankers, banks, rating agencies, wall street and lack of regulation of the private mortgage market. Wall Street and our beloved federal government played the key roles. Wall street created the bomb, sub-prime loans. The government failed to fulfill one of its principle responsibilities; assuring that private enterprises and markets are conducting business in an honest manner that protects the citizens of this country.

                    In 1998 I left that industry to concentrate on commercial real estate loans. In 2005 a life-long friend of mine asked me to do some consulting work for him on a residential mortgage company that he started in 2004. One of the first actions I took was to review some loan files to check the "quality" of the loans that they were making. After reviewing a half-dozen files I went into his office and said he had a huge problem. The loans that his company was processing were of very poor quality and either he was wasting allot of time and effort on deals that were not going to fly, or his "buyers" of these loans were going to pull his right to sell them anymore loans. More:
                      • Davis X. Machina
                      • SW Maine
                      The notion of truth and falsity, in the sense of comporting with external reality, is an outdated, bourgeois, notion. The real test of truth and falsity is so: "Does this statement advance the interests of the Party, and does it support the Party in its leading role, as Vanguard of the Revolution?"

                      If the answer is yes, the statement possesses *revolutionary* truth, far superior to the merely bourgeois sort of truth Mr. Nocera is concerned with.

                      All correctly-oriented cadres know this. All power to the soviets of preachers and hedge-fund managers!

                      The GOP is the last major Leninist party in the parliamentary West.
                      1. Is there any objective evidence that right wingers engage in "big lie" tactics more tan other politicians? If so, why?
                          • Phil Bin
                          • Bermuda Triangle
                          this is typical doc hastings: the big lie with the big smile.
                          1. "supposed to pretend that we’re having a civilized discussion between people with good intentions. And you’re supposed to match each attack on Republicans with an attack on Democrats, as if the mendacity were equal on both sides. Sorry, but it isn’t. Democrats aren’t angels; they’re human and sometimes corrupt — but they don’t operate a lie machine 24/7 the way modern Republicans do."

                            Dr. Krugman, I am so glad you made this clear statement of our current political mis-dialogue! Let the media incorporate this truth into their reporting! Let Obama incorporate this fact of political life into his "bipartisanship" thinking! Let the people watching Faux News incorporate this into their listening to the propaganda masquerading as news!

                            Hear! Hear! I am so happy you have put this clear statement of truth into print! Thank you!
                            And thanks for being there where we need you!
                              • Feiner
                              • New York, NY
                              As Daniel Patrick Moynihan said, "Everyone is entitled to his own opinion, but not his own facts." Apparently, the Republicans are entitled to their own facts.
                                • Mark
                                • San Jose, CA
                                This disregard for truth and honest discussion is one of the biggest, if not THE biggest problem in our public dialog today. I cannot help thinking this is a consequence of too many lawyers: in a courtroom, litigators are not interested in the truth, they are interested in winning the case; this seems to be the standard approach for political discourse now. It is appalling that the news organizations are not willing to try to look at objective truth rather than the appearance of balance.
                                1. Joe (and you) are of course correct that Fannie and Freddie were simply "there", and not at all running the show (although their late entry probably delayed the crash). It is important to note however that it is not necessary for Wallison to be "intellectually dishonest" (or any kind of dishonest, for that matter) for "The Big Lie" to be in operation.

                                  Wallison probably does in fact believe what he is saying. And because he does, his bills are being paid and he is being provided access to the forums he appears in by someone or ones who stand to make (or at least not lose) a lot of money because Peter is saying what he is saying. ... And even Peter's sponsors do not have to be lying for "The Big Lie" to be in operation. They have to simply not care about what is true.
                                    • t0mgardner
                                    • SF Bay Area
                                    It would help me to understand (and explain to my right wing friends) why Fannie and Freddy were NOT the primary cause of the financial crisis if I could see where are the private sector cash losses equivalent to the 124 billion US$ that is now estimated to be the taxpayers "cost" of their less than prime mortgage purchases. That is, if the private mortgage market was the primary cause then I would have expected to see four or more times the "losses" but I can only see about 80 billion US$ that went thru AIG. I suspect the private "losses" are distributed across many institutions and in many cases still on the books of banks and such, but that is a weak explanation against they very hard 124 billion. Has any one published a comprehensive cash flow analysis of the this crisis which would clearly show the "culprits"?
                                    1. In August of 2004, as an active member of North Carolina Veterans for Kerry-Edwards and seeing the handwriting on the wall, I told Kerry's North Carolina state chairman that we were going to lose if Kerry didn't start cramming Bush's lies down his throat on a daily basis. I was told that my comment "was not helpful." And we learned once again the consequences of letting lies go unchallenged.

                                      You have been addressing the issue of lying with some regularity lately and I urge you to continue doing so. The lies regularly issuing from the right and the cowardice of the left in its lack of response to them are symptoms of something even more troubling: the intellectual and moral bankruptcy that has poisoned the well of our democracy. There is good reason the Devil is known as "The Prince of Lies."
                                        • Jack Morava
                                        • Baltimore/Charlottesville
                                        > Democrats aren’t angels; they’re human and sometimes corrupt
                                        > — but they don’t operate a lie machine 24/7 the way modern
                                        > Republicans do.

                                        Tell it like it T I S, Professor!
                                        1. An (honest) question from the peanut gallery: I find your arguments compelling on this..always have.....but that begs the question: Why does Michael Bloomberg, who is NOT generally of the Republican big lie crowd on all issues, believe it in this case? Anyone with any insights here?
                                          1. I started paying attention to economics in the late 1950's. I just could not understand things, but there was little information available to help me learn. I remember very well hearing Milton Friedman explaining our economy on a variety of political talk shows. I could follow his argument, and I agreed with most of what he was saying, but, at the end, he always seemed to swerve from his line and come up with a policy that did not make sense.

                                            Over the years, similar situations were the rule. Economists would argue one thing and the recommend another. It was nuts. After a while, I concluded that the reason that I couldn't understand economics was that it truly did not make sense.

                                            Professor Krugman asked in one of his posts upstream, "What ever happened to the economics profession?" He speaks as if the present mendacity is new. It isn't. Professor Krugman and a few others actually inhabit a profession, but most so-called economists live in a different world. Economists need to be licensed, and they must be subject to regulation. If they give the patient the wrong pills they should suffer penalties.
                                              • Steve
                                              • Ann Arbor, Michigan
                                              The problem is going to have to start costing the liars money - either in lawsuits or lost credibility or both.

                                              You should not be able to yell "fire" in a crowded room nor report "news" via "memos of the day".
                                                • Joe D
                                                • Washingtown, DeeCee
                                                Ever since Bill Clinton stole the only ideas the Republicans had that the American middle class wanted to buy, they've had nothing they could sell honestly. Consequently, lies and character assassination are the only modes of argument left to them.
                                                  • Bruce Krasting
                                                  • NYC
                                                  Right PK, F/F are the good guys in this story. What drivel.

                                                  Happy Holiday!
                                                    • Mitchell M. Gitin
                                                    • San Francisco
                                                    It is strange that Mr. Nocera's column makes no mention of the book "Reckless Endangerment" by his colleague on the NYT, Gretchen Morganstern, which goes right for the throats of Fannie Mae and Freddie Mac and Jim Johnston and Franklin Raines (the book was savaged by at least one reviewer who largely exonerated Fannie and Freddie). How is a non-economist/non-housing expert to make sense out of these competing versions of the truth on this highly important issue? Will we ever get a comprehensive and truthful picture of how the run-amuck American housing sector (handwifed by many) almost destroyed the world's financial system in 2008 and whose heritage is still being felt in the European debt crisis as many of the European banks whose weak balance sheets are a contributing factor to that crisis had their balance sheets savaged by sub-prime backed CDOs originated in the American housing market?

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