I am writing this to provoke a conversation rather than as a demonstration of my expertise. Here was one of the first New Deal agencies go under. What was the interest in privatizing Fannie Mae during the Johnson administration? Was it the Democrats close ties with the savings and loan industry?
Because these two agencies had apparent (but nonexistent) government guarantees, they apparently had an advantage over banking interests. For a long time, well before anyone fretted about housing crises, there was a great deal of antagonism toward these agencies. During that period, I was wondering what the elimination of these two agencies would mean for housing. Now that they are in trouble, the government stands ready to rescue the investors -- another instance of the Bear Stearns syndrome. But barely anything to help the poor souls who were victimized.
On a personal note, my daughter was wanting to buy a home about a couple years ago. Her friends sent her to stay broker to explain how she could fudge her nonexistent income and get a home. She was told she could create a good credit score, even as she had no credit.
Okay, here is my central question: has there ever been a privatization that has worked to the benefit of society?
michael,
ReplyDeleteTo answer your central question, the Japanese coal mining industry was once state-owned back in the 1800s. The privatization was successful.
As for the FMs, I do not know the exact answer, although I think your theory about the Dems and the Savings and Loan industry is basically right (and the S&Ls also had the GOPsters in their pockets pretty much as well).
Another element is that when the FMs were created in the 1930s, this was also the jumpstarting of the entire secondary mortgage market, which had not existed previously. By the 1950s lots of the S&Ls and some other entities had gotten into it and resented what they saw as the special breaks the FMs were getting. So, even good liberals did not see the FMs as serving such a necessary function anymore that needed such a special status.
perelman,
ReplyDelete"Okay, here is my central question: has there ever been a privatization that has worked to the benefit of society?"
Just how big a sector of society did you have in mind, society at large, in general or maybe just a teensy portion there of? The analysis of effect of an action, espescially a governmental action, is often differential. Some gain, some lose. When the losers far outnumber the gainers the gains tend to be stupendous. Hence the political will to serve the few at the expense of the many.
It's all very basic though not often taught in poli-sci school or, for that matter, in the halls of Econonmo University. The wealthiest within any society learn of this phenomenon at the foot of the table. It's not exactly a Skull & Bones codification, but along thoughs lines.