A crisis explained

Thomas Sowell has for years been probably America's best writer on economics, particularly when that discipline intersects with politics. During the 1990s I used his book The Vision of the Anointed with undergraduates; I'd recommend that professors now use his new book, The Housing Boom and Bust.

Housing cuts to the essence: "In a complex story about intricate financial arrangements, it is possible to lose sight of a plain and fundamental fact-that behind all the esoteric securities and sophisticated financial dealings are simple, monthly mortgage payments from millions of home buyers across the country. When many of those payments stop coming, no amount of financial expertise in Wall Street or government regulatory intervention from Washington can save the whole investment structure built up on the foundation of those mortgage payments."

Sowell then asks the bedrock question: "Why did so many monthly mortgage payments stop coming? And the bedrock answer is: Because mortgage loans were made to more people whose prospects of repaying them were less than in the past. Nor was this simply a matter of misjudgment by banks and other lenders. The political pressure to meet arbitrary lending quotas, set by officials with the power of economic life and death over banks and over Fannie Mae and Freddie Mac, led to riskier lending practices than in the past."

Lots of interest groups, including some homebuilders and real estate investors, profited from the housing boom, but those who came in late lost out completely. Nevertheless, as Sowell writes, "even the ensuing national crisis did nothing to end the political attractiveness of making housing affordable by government fiat, rather than by individuals buying or renting housing that was within their own income range. . . . Disastrous consequences of the affordable housing crusade have led only to seeking other ways of carrying on that same crusade."

Avarice-often lust for political power even more than lust for money-remains in the saddle, yet people largely know that avarice is wrong. The bigger problem comes when self-seekers bathe their motives in supposed altruism: "Few things blind human beings to the actual consequences of what they are doing like a heady feeling of self-righteousness during a crusade to smite the wicked and rescue the downtrodden."

Searching for a Reagan

In his splendid The Age of Reagan: The Conservative Counterrevolution, 1980-1989 (Crown Forum, 2009), Steven Hayward records that Ronald Reagan lacked the one ability almost all successful politicians have: the ability to remember names and connect them to faces. He also did not follow the usual practice of learning lots of factoids and sprinkling them into his talk as if knowledge of trivia equaled wisdom.

Instead, Reagan practiced analysis by anecdote. Some derided that approach, but Reagan knew from a lifetime of observation that governmental power invariably curtails liberty: He was not fooled into thinking that a benign bureaucracy would use power wisely. When he heard a story that provided specific detail concerning what he knew theoretically to be true, he made use of it: He grabbed hearts and did not just tickle minds. Whether speaking to domestic lobbyists or Soviet leader Mikhail Gorbachev, he made others respond to his insights.

During the 1990s I displayed on my university office door a poster showing how leading academics as late as 1988 were awed by Soviet power, but Reagan rightly predicted the USSR's downfall. That's because Reagan was as much of a poet as John Lennon was, but with greater powers of imagination. Lennon's imagination was standard issue left: "Nothing to kill or die for/ And no religion too." Reagan knew that if there's nothing to die for, there's nothing much to live for either.

No one could communicate bedrock truths as well as Reagan, so the search for his successor continues. With 1980 and 1984 as the exceptions, Republicans have typically nominated the well-connected rather than the well-spoken. In the Obama Age that's a luxury the country can no longer afford.