I guess we should acknowledge a tiny improvement when an ordinarily in-the-tank apparatchik like Jim Kuhnhenn at the Associated Press expresses even the slightest bit of skepticism about a White House claim.
But let's not take it too far. Kuhnhenn is reporting in a brief "Big Story" item this morning that President Obama "is laying claim to an economic turnaround and warning Republicans not to risk a backslide by threatening a government shutdown or a debt default." Kuhnhenn's skeptical points are that "The economic scorecard is mixed. ... Growth has been tepid and unemployment remains high." His five-paragraph report, reproduced in full for fair use and discussion purposes, follows the jump.
Here is how Kuhnhenn's AP story appeared as of 11:09 a.m. (since revised to a much longer report):
If Obama had wanted to correctly mark the five-year anniversary of the financial crisis, he would have chosen September 7, the five-year anniversary of the government's seizure of the two hopelessly insolvent government-sponsored enterprises known as Fannie Mae and Freddie Mac. These two entities did more to create and then extend the housing and mortgage lending debacles than any private-sector entity ever did.
The Lehman Brothers bankruptcy was the largest in U.S. history (bolds are mine throughout this post):
Lehman had assets of $639 billion at the end of May (2008) ... The Chapter 11 filing did not include Lehman's broker-dealer operations and other units, such as asset management firm Neuberger Berman.
... At the end of August (2008), Lehman had $600 billion of assets financed with just $30 billion of equity.
But Lehman's size and scope was almost a rounding error compared to Fan and Fred, and then-Treasury Secretary Hank Paulson admitted to Fan and Fred's outsized nature the day the government took them over:
... Freddie and Fannie are responsible for about $5 trillion in home loans in the U.S.
... Paulson agreed that despite the cost to taxpayers, the takeover was unavoidable.
"Let me make clear what today’s actions mean for Americans and their families," Paulson said. "Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe."
Especially given how many people are now saying in retrospect that taking Lehman Brothers into bankruptcy was "a tragic error" and the like, it's not out of bounds to wonder if its bankruptcy was engineered to tag a private-sector scapegoat for the housing and mortgage-lending messes other than Fan and Fred, the obvious and still historically accurate choices.
It also cannot be emphasized enough that Fan and Fred didn't just lower credit standards in the entire housing market and take on a huge amount of risky loans which resulted from those risky loans. That was bad enough, but they went much further.
Fan and Fred exponentially increased systemic risk in the economy by deceiving the bond markets and the bond ratings agencies about the nature of the loans they securitized. Specifically:
... research by Edward Pinto, a former chief credit officer for Fannie Mae and a housing expert, has found that from the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A. (Alt-A is a risk level between prime and subprime. -- Ed.)
Fan and Fred dwarfed the entire private sector, not just Lehman, as Peter Wallison detailed in the Wall Street Journal in October 2010 as the Occupy movement was targeting "Wall Street":
... (the private-sector portion of) this market consisted of about 7.8 million subprime loans, somewhat less than one-third of the 27 million that were then outstanding. The private financial sector must certainly share some blame for the financial crisis, but it cannot fairly be accused of causing that crisis when only a small minority of subprime and other risky mortgages outstanding in 2008 were the result of that private activity.
Obama's choice of the five-year anniversary of the Lehman Brothers bankruptcy filing to mark the beginning of the "financial crisis" appears to be a deliberate choice designed to advance an obviously false "the private sector did it" meme.
As to the "economic scorecard": Though the level of human suffering is nowhere near as bad, this economy's attempt to rebound far more closely resembles what took place during the 1930s than it does any recovery from a downturn since World War II, as seen in the following layour comparing recovery of GDP, recovery of per capita GDP, and unemployment:
Based on this scorecard, the "mix" supports the claim that there is only the slightest of "turnarounds" -- and it's taken over four years since the recession's end to achieve it. But even that slight "turnaround" vanishes once one factors in median household income, which is still over 4% below where it was at the recession's end.
Memo to Jim Kuhnhenn: "The American public isn't convinced that the economy is mending" because the economy isn't mending.
Cross-posted at BizzyBlog.com.
