Thursday, February 14, 2013

It's not the water, Mr. Rubio

Ducking from reality?

As entertaining as it was seeing the "saviour" of the Republican party ducking for hydration under the hot lights and scrutiny of the national stage, it wasn't the water grab that made Rubio's response to the SOTU so abysmal, it was the substance of his talk.

Rubio's remarks on the housing meltdown shows that he really has no understanding of what brought on the seminal economic event of his generation, the Great Recession:

This idea – that our problems were caused by a government that was too small – it’s just not true. In fact, a major cause of our recent downturn was a housing crisis created by reckless government policies.

Paul Krugman points out that this is one of the most thoroughly researched issues of the last 4 years and the evidence is overwhelming that The GSE's (Fannie and Freddie) and the Community Reinvestment Act (CRA) had no negative effect on lending .  In fact, not only was every single bad loan, no-doc loan, robo-signed loan initiated in the private sector, the same private sector had lobbied hard to mitigate the regulatory effects of the CRA.

Michael Konczal gives a more exhaustive and referenced summary (his copious references are worthwhile). Here are the Cliff's Notes:

1. The first thing to point out is that the both the subprime mortgage boom and the subsequent crash are very much concentrated in the private market, especially the private label securitization channel (PLS) market.  The GSEs were not behind them....
2.The CRA wasn’t big enough to remotely cause these problems.
3. Did Fannie and Freddie buy high-risk mortgage-backed securities? Yes. But they did not buy enough of them to be blamed for the mortgage crisis. 
4. For fun, we should mention that the conservative think tanks spent the 2000s saying the exact opposite of what they are saying now...[T]hey argued that the CRA and the GSEs were getting in the way of getting risky subprime mortgages to risky subprime borrowers.
5.  Private label securitization is responsible for 42% of all delinquencies despite accounting for only 13% of all outstanding loans as compared to the GSEs being responsible for 22% of all delinquencies despite accounting for 57% of all outstanding loans.
6.  The three Republicans on the Financial Crisis Inquiry Commission (FCIC) panel rejected the “Blame the GSEs/Congress” approach in their minority report.  Indeed, they, and most conservatives who know this is a dead-end...
7.  The GSEs had a serious corruption problem and were flawed in design...but they were not the culprits of the bubble.

OK, so Rubio Jindalled himself as "saviours" are wont to do, but forget the water gaffe. The real reason Rubio is unqualified to take a leadership role in government is because he lacks the requisite critical thinking and fails to grasp the lessons of the financial crisis.

One word of advice to the Republican party: stop looking for a "saviour" and start familiarizing yourselves with empiric evidence of reality around you. GOP candidates seem to have a frail grasp on everything from abortion being reduced by contraception and sex ed, gun deaths being directly proportional to gun ownership, immigration and voting demographics, entitlement programs' cost versus defense spending, etc. 

Facts matter.

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