Last night and this morning I engaged in a lengthy Twitter exchange with Russ Roberts @EconTalker regarding his admission that his bias directs his economics and his economics policies.
My challenge was what was relevant was his motives not his bias (for even a dog knows the difference between being tripped over an being kicked).
While he denies such, Roberts is a conservative in that all his policy proscriptions always, at the end, line up with the financial and political interests of the .01%.
I have challenged Roberts to answer the arguments of Jefferson and Madison for, inter alia, silent laws that promote equality and equal political power but he has not and I doubt he will answer.
I have also challeged Roberts to explain why Jefferson was wrong in advocating for the University of Virginia.
In the course of his defense, Roberts asserted he wasn't a voice for the .01 because he opposed the bank bailouts. The problem is that the bank bailouts didn't bail out the Kochs, the .01%, they bailed out the lower class, the 85/90 to 99%.
To understand why requires a knowledge of how the financial crisis came about deep within the applicable federal regulations.
I learned in 2001 the mis-workings of Greenspan when I took on a case where the appraiser for a national bank's loans had no office but was working out of a bar in Southern Illinois. A real estate developer was preparing the appraisals and bringing to the bar to be signed and sealed, naturally for cash. The bank would then securitize the loans, all with the watching and approving eye of Alan Greenspan engaged in Galt-style financial regulation of the sort approved of by Roberts (if Roberts didn't know this was how loans were being made he has no business advocating the US public should take the hit for bad loans).
To the specifics. At the time, federal bank regulations detailed that loans made by national banks had to be appraised. The professionalism of the appraiser was to be a check on bad loans. To assure professionalism, the bank originating the loan was supposed to hire the appraiser who would then tend to be honest because his economic and legal duties ran to the lending bank. Here is the applicable regulation:
Subsection (b)(1) is pretty straight forward. If the lending national bank had hired and paid the fee appraiser with his office in a bar, that would pass muster under the regulation. But, that was not what was going on. Recall, the real estate developer who was building and selling homes was preparing loan applications for its buyers and hiring the appraiser, paying him in cash.
Section (b)(2) applies directly to the transactions as they were actually being conducted. The loans were suitable for making and securitization if, and only if, the real estate developer was a financial services institution.
One would naturally ask, do the regs say what is a financial services institution? The answer: "No," leaving it up to the OCC, which regulated the national bank, and the Federal Reserve, which regulated its holding company, to determine who or what was a financial services institution.
Greespan, with his wacko-libertarian ideas, had no problem classifying everyone, including the real estate developer who was taking loan apps so as to sell new homes, as a financial services institution.
Very simply, by constructing a single regulation (hidden deep withing CFR), Greenspan and the OCC completely deregulated the underwriting and securitization of home loans in the United States.
No license was required. Anyone could call themselves a financial services institution, take loan applications and submit them to a national bank. A national bank could then make the loan and resell such via securitization, dodging the risk of loss if the loan went bad, leading the public to believe the loan underwriting process had been supervised for safety and soundness when, in fact, it was as corrupt as possible when those with the greatest financial interest in the transaction could select and hire the appraiser, paying them cash to assure their disloyalty.
On October 6, 2008 Economist Robert H. Dugger said what Greenspan was doing was "packing US debt as sausage, wrapped such up as Credit Default Swaps with mouse hairs" not filet mignon at 33:40
That my friends is the free market world for which Russ advocates; sausage wrapped to imply it is filet mignon but in reality, sausage with mouse hairs.