WC Varones

Don't lend your hand to raise no flag atop no ship of fools

U of Wisconsin prof Menzie Chinn: I think Sarah Palin is so stupid that I can't even articulate why

University of Wisconsin professor Menzie Chinn:
In response to the largest de facto nationalization in US history, we have this example of Governor Palin's comprehension of this issue (ABC News):

Saturday in Colorado Springs, Colo., Alaska Gov. Sarah Palin said, "The fact is that Fannie Mae and Freddie Mac have gotten too big and too expensive to the taxpayers. The McCain-Palin administration will make them smaller and smarter and more effective for homeowners who need help."

I can't even start to dissect what's wrong with this statement, so I will let the reader assess Palin's understanding of the role of the GSEs in the financial system. From my perspective, I would have hoped to have more comprehension from a candidate at a time when the estimate of a resulting $300 billion taxpayer liability is viewed as plausible.

I can't even start to dissect what's wrong with this statement? That's what passes for argument in Wisconsin?

Well, Menzie concedes that this is "the largest de facto nationalization in US history" and that a $300 billion taxpayer liability is plausible, so he doesn't seem to have any argument with Palin's first sentence.

As for making them smaller and smarter and more effective, how about getting them into the business of funding 30-year fixed-rate, fully documented loans with honest appraisals and reasonable debt-to-income ratios? That would make them smaller, smarter, and more effective, no? Perhaps Menzie, being an incurious dim bulb, labors under the popular misconception that Fannie and Freddie only funded high-quality mortgages. Taking a quick look at their balance sheets, as Dr. Housing Bubble did, would have disabused him of this notion. Fannie and Freddie participated in the loose standards that made housing so unaffordable.

If that's what passes for professoring in Wisconsin, the people of Wisconsin are being ripped off. I would have hoped for more comprehension from a "Professor of Public Affairs and Economics."

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