Various politicians and pundits seized on the Amtrak derailment as a narrative of failure to spend on infrastructure. Then it turned out that at 100 miles per hour the train was going twice the speed limit in the area.
Similarly, when the financial crisis struck, politicians and pundits seized on it as showing an excess of greed and exploitation by banks and an “atmosphere of deregulation” that allowed the banks to run amok. In my view, this is as misleading as the narrative about the train derailment.
Some further comments.
1. Perhaps in the end both misleading narratives will dominate. Maybe that is just the way things work in matters where what matters is the political orientation of most journalists and historians.
2. Perhaps the misleading narrative of the train derailment will not stand. Perhaps the facts will stand in the way. On the other hand, the complexity of the financial crisis makes it difficult to sift through the facts, and by the same token makes it easy to impose a dubious narrative.
3. Perhaps eventually historians will look more carefully and objectively at the financial crisis, and the misleading narrative will be set aside.
As of this writing, my money is on (1).
I remember that you had written that you once worked for or advised Fannie Mae. In the aftermath of Lehman you did write some on the role that Fannie played and how it might have also been scapegoated for the narrative of the overall financial disarray.
I wish you would write again on that because of the value of the insiders perspective. And it would be interesting to know your interpretation today, whether your thinking on the issue has been revised over time.
Also, if this were the ASK ARNOLD segment, I would add this question: Do you still believe in the mission of Fannie? Or, in an ideal world would we be better off without a qausi-governmental clearinghouse for mortgage loans?
For my views on the crisis see http://mercatus.org/publication/not-what-they-had-mind-history-policies-produced-financial-crisis-2008
For my views on Fannie and Freddie, see http://mercatus.org/publication/house-cards
Or not misleading at all. A system of positive train control has been proposed for nigh half a century, and when investment bank employees are making jokes about the garbage they are producing maybe we should take them seriously. Never fail revisionists always have the one answer though.
So who is arguing for positive train control (putting the regulations back on)?
Google could automate trains in their sleep.
Sounds like you have a right-wing bias in favor of the private sector. 🙂
Henry Hazlitt from his “Economics in One Lesson”
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Economics is haunted by more fallacies than any other subject. The difficulties of the subject are great enough. And they are multiplied a thousandfold by the special pleadings of selfish interests.
A group may benefit greatly from certain policies. It will hire the best buyable minds to argue plausibly and persistently for them. It will either convince the public or so befuddle the argument that clear thinking becomes next to impossible.
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4, or maybe,1b- nobody will remember the narratives. The point will be to pass the legislation and then write in a heroic role for the politicians.
Surprised this post didn’t end with “Have a nice day.”