Iraq War Effects Missing from Coverage of Fannie Mae and Freddie Mac Troubles

Libhomo blogs at Godless Liberal Homo. His article today is spot-on in my humble estimation. ~Dusty

This New York Times article ( “U.S. Weighs Takeover of Two Mortgage Giants” - 7/10/08) is typical of how the corporate media omit underlying causes in reporting on current economic difficulties.

You can see how the Iraqtastrophe is impacting events, but you have to think very carefully while you read. Here’s one example, a sentence starting the second paragraph:

The companies, Fannie Mae and Freddie Mac, have been hit hard by the mortgage foreclosure crisis.

Let’s review three of the ways that the war on Iraq has contributed to this foreclosure crisis.

- The resulting increase in oil prices has pushed some people who were near default on their mortgages over the edge.

- The rising oil prices and increased budget deficits have slowed the overall US economy down. Newly unemployed people are much more likely to lose their homes to foreclosure.

- Higher oil prices have increased trade deficits. Those deficits, along with growing budget deficits, have resulted in a falling dollar. A weak dollar is unattractive to foreign investors, including risk tolerant ones that otherwise might be interested in buying heavily discounted US mortgage paper.

Now, let’s review a paragraph later in the article (bolding mine).

The companies are by far the biggest providers of financing for domestic home loans. If they are unable to borrow, they will not be able to buy mortgages from commercial lenders. In turn, that would make it more expensive and difficult, if not impossible, for home buyers to obtain credit, freezing the United States housing market. Even healthy banks are reluctant to tie up scarce capital by offering mortgages to low-risk home buyers without Fannie and Freddie taking the loans off their books.

One of the reasons capital is so scare is that the Bush regime is borrowing so much money to pay for their colonial occupation of Iraq. Hundreds of billions of dollars have been borrowed to feed this fiscally voracious war, money which is unavailable for home and commercial credit.

Obviously, Iraq isn’t the only cause of our economic difficulties. Financial market deregulation, tax cuts for the rich, and other policies which shift wealth from the middle class and the poor to the super rich all are important as well. Yet, how can we have an informed political debate if so much of what is ailing us is kept off of the metaphorical table?

Some opponents of the war say that the vast majority of Americans are not sacrificing anything to the war in Iraq. It certainly is true that military members and their families make much larger sacrifices than everyone else. However, all of us are sacrificing for this unpopular war. We are just being lied to about it.

Iraq is a proverbial “elephant in the living room” of American economic discussion. Our nation better start talking about it.