A Brief History…

Accounts from the Romney camp have described him as “shellshocked” by his loss. The enthusiasm and huge turnout for rallies must have given him a sense of victory but it was snatched away by Obama’s professional organization. The Huffington Post is not exactly a source of wisdom on this topic but it is useful to see what the left believes. There is, of course, a lot of nasty comments following that article but I don’t believe they have seen the truth.

Peggy Noonan seems to think she knows the answer and maybe she has a piece of it.

Mitt Romney’s assumed base did not fully emerge, or rather emerged as smaller than it used to be. He appears to have received fewer votes than John McCain. The last rallies of his campaign neither signaled nor reflected a Republican resurgence. Mr Romney’s air of peaceful dynamism was the product of a false optimism that, in the closing days, buoyed some conservatives and swept some Republicans. While GOP voters were proud to assert their support with lawn signs, Democratic professionals were quietly organizing, data mining and turning out the vote. Their effort was a bit of a masterpiece; it will likely change national politics forever. Mr. Obama was perhaps not joyless but dogged, determined, and tired.

OK but why ?

She quotes someone else but this doesn’t sound right to me. At least I hope not.

“A majority of the American people believe that the one good point about Republicans is they won’t raise taxes. However they also believe Republicans caused the economic mess in the first place and might do it again, cannot be trusted to care about cutting spending in a way that is remotely concerned about who it hurts, and are retrograde to the point of caricature on everything else.” She notes that in exit polls Republicans won the “Who shares your values?” question but lost on the more immediately important “Who cares about people like you?” “So it makes sense that many . . . are comfortable with the Republicans providing a fiscal brake in the House, while having the Democrats ‘who care’ own the Senate and the Presidency. And that is what we got.”

Speaking of caricatures… We have a president and a party, the Democrats, who have ignored economic realities for four years and more. The cause of the financial meltdown began with a Democrat initiative. They wanted to make home ownership more available to minorities regardless of their credit worthiness. It resulted in a housing bubble and a disaster somewhat similar to that of 1929.

I will agree that Bush did not recognize the danger and make it an issue. Some of his administration did, however. We know what happened. It has been explained.

Congressman [Barney] Frank, of course, blamed the financial crisis on the failure adequately to regulate the banks. In this, he is following the traditional Washington practice of blaming others for his own mistakes. For most of his career, Barney Frank was the principal advocate in Congress for using the government’s authority to force lower underwriting standards in the business of housing finance. Although he claims to have tried to reverse course as early as 2003, that was the year he made the oft-quoted remark, “I want to roll the dice a little bit more in this situation toward subsidized housing.” Rather than reversing course, he was pressing on when others were beginning to have doubts.

“It is government’s fault for offering a housing finance program without making an effort to maintain underwriting standards.”–Peter J. Wallison

His most successful effort was to impose what were called “affordable housing” requirements on Fannie Mae and Freddie Mac in 1992. Before that time, these two government sponsored enterprises (GSEs) had been required to buy only mortgages that institutional investors would buy–in other words, prime mortgages–but Frank and others thought these standards made it too difficult for low income borrowers to buy homes. The affordable housing law required Fannie and Freddie to meet government quotas when they bought loans from banks and other mortgage originators.

This was the beginning of the bubble and ended with the collapse.

At first, this quota was 30%; that is, of all the loans they bought, 30% had to be made to people at or below the median income in their communities. HUD, however, was given authority to administer these quotas, and between 1992 and 2007, the quotas were raised from 30% to 50% under Clinton in 2000 and to 55% under Bush in 2007. Despite Frank’s effort to make this seem like a partisan issue, it isn’t. The Bush administration was just as guilty of this error as the Clinton administration. And Frank is right to say that he eventually saw his error and corrected it when he got the power to do so in 2007, but by then it was too late.

There are you tube videos of Bush officials being berated by Democrats as they try to press for better standards for mortgage loans. Paul Gigot identified some of the villains.

Angelo Mozilo was in one of his Napoleonic moods. It was October 2003, and the CEO of Countrywide Financial was berating me for The Wall Street Journal’s editorials raising doubts about the accounting of Fannie Mae. I had just been introduced to him by Franklin Raines, then the CEO of Fannie, whom I had run into by chance at a reception hosted by the Business Council, the CEO group that had invited me to moderate a couple of panels.

Mr. Mozilo loudly declared that I didn’t know what I was talking about, that I didn’t understand accounting or the mortgage markets, and that I was in the pocket of Fannie’s competitors, among other insults. Mr. Raines, always smoother than Mr. Mozilo, politely intervened to avoid an extended argument, and Countrywide’s bantam rooster strutted off.

Notice that the executives of Fannie Mae are all Democrats and left with hundreds of millions. Mr Gigot goes on:

I recount all this now because it illustrates the perverse nature of Fannie and Freddie that has made them such a relentless and untouchable political force. Their unique clout derives from a combination of liberal ideology and private profit. Fannie has been able to purchase political immunity for decades by disguising its vast profit-making machine in the cloak of “affordable housing.” To be more precise, Fan and Fred have been protected by an alliance of Capitol Hill and Wall Street, of Barney Frank and Angelo Mozilo.

I know this because for more than six years I’ve been one of their antagonists. Any editor worth his expense account makes enemies, and complaints from CEOs, politicians and World Bank presidents are common. But Fannie Mae and Freddie Mac are unique in their thuggery, and their response to critics may help readers appreciate why taxpayers are now explicitly on the hook to rescue companies that some of us have spent years warning about.

My battles with Fan and Fred began with no great expectations. In late 2001, I got a tip that Fannie’s derivatives accounting might be suspect. I asked Susan Lee to investigate, and the editorial she wrote in February 2002, “Fannie Mae Enron?”, sent Fannie’s shares down nearly 4% in a day. In retrospect, my only regret is the question mark.

Mr. Raines reacted with immediate fury, denouncing us in a letter to the editor as “glib, disingenuous, contorted, even irresponsible,” and that was the subtle part. He turned up on CNBC to say, in essence, that we had made it all up because we didn’t want poor people to own houses, while Freddie issued its own denunciation.

The companies also mobilized their Wall Street allies, who benefited both from promoting their shares and from selling their mortgage-backed securities, or MBSs. The latter is a beautiful racket, thanks to the previously implicit and now explicit government guarantee that the companies are too big to fail. The Street can hawk Fan and Fred MBSs as nearly as safe as Treasurys but with a higher yield. They make a bundle in fees.

At the time, Wall Street’s Fannie apologists outdid themselves with their counterattack. One of the most slavish was Jonathan Gray, of Sanford C. Bernstein, who wrote to clients that the editorial was “unfounded and unsubstantiated” and “discredits the paper.” My favorite point in his Feb. 20, 2002, Bernstein Research Call was this rebuttal to our point that “Taxpayers Are on The Hook: This is incorrect. The agencies’ debt is not guaranteed by the U.S. Treasury or any agency of the Federal Government.” Oops.

At one time, Paul Ryan, as a Congressman, was being stalked by a Fannie Mae functionary who sent telegrams to his constituents telling them that the Congressman was trying to raise their mortgage payments.

Such a debacle after so much denial would have sunk any normal financial company, but once again Fan and Fred could fall back on their political protection. In the wake of Freddie’s implosion, Republican Rep. Cliff Stearns of Florida held one hearing on its accounting practices and scheduled more in early 2004.

He was soon told that not only could he hold no more hearings, but House Speaker Dennis Hastert was stripping his subcommittee of jurisdiction over Fan and Fred’s accounting and giving it to Mike Oxley’s Financial Services Committee. “It was because of all their lobbying work,” explains Mr. Stearns today, in epic understatement. Mr. Oxley proceeded to let Barney Frank (D., Mass.), then in the minority, roll all over him and protect the companies from stronger regulatory oversight. Mr. Oxley, who has since retired, was the featured guest at no fewer than 19 Fannie-sponsored fund-raisers.

Of course, Sarbanes-Oxley was the Congressional response to Enron that has driven new investments offshore and Dodd-Frank is now to regulate banks. Fox and hen house here big time.

Or consider the experience of Wisconsin Rep. Paul Ryan, one of the GOP’s bright young lights who decided in the 1990s that Fan and Fred needed more supervision. As he held town hall meetings in his district, he soon noticed a man in a well-tailored suit hanging out amid the John Deere caps and street clothes. Mr. Ryan was being stalked by a Fannie lobbyist monitoring his every word.

On another occasion, he was invited to a meeting with the Democratic mayor of Racine, which is in his district, though he wasn’t sure why. When he arrived, Mr. Ryan discovered that both he and the mayor had been invited separately — not by each other, but by a Fannie lobbyist who proceeded to tell them about the great things Fannie did for home ownership in Racine.

I don’t want to belabor this further but the Republicans did not drive the mortgage meltdown that led to the financial crisis.

More Peggy Noonan.

America has changed and is changing, culturally, ethnically—we all know this. Republican candidates and professionals will have to put aside their pride, lose their assumptions, and in the future work harder, better, go broader and deeper.

We are a center-right country, but the Republican Party over the next few years will have to ponder again what center-right means. It has been noted elsewhere that the Romney campaign’s economic policies more or less reflected the concerns of its donor base. Are those the immediate concerns of the middle and working classes? Apparently the middle class didn’t think so. The working class? In a day-after piece, Washington Post reporters Scott Wilson and Philip Rucker wrote: “As part of his role, [Paul] Ryan had wanted to talk about poverty, traveling to inner cities and giving speeches that laid out the Republican vision for individual empowerment. But Romney advisers refused his request to do so, until mid-October, when he gave a speech on civil society in Cleveland. As one adviser put it, ‘The issues that we really test well on and win on are not the war on poverty.'”

That is the authentic sound of the Republican political operative class at work: in charge, supremely confident, essentially clueless.

I’m not sure anymore if we are a center right country. I know the Tea Party, which Ms Noonan treats with contempt, is still center right, or more likely libertarian. I see Fred Barnes write about Congressman Akins who made the notorious gaffe about rape not causing pregnancy as a “Tea Party backed candidate.” I always thought Fred Barnes was pretty sharp. I do know that he is an evangelical Christian and that may be warping his judgement a bit. Akin was NOT supported by the Tea Party in Missouri, which supported Sarah Steelman not Todd Akin.

Anyway, I am very interested in why the white voter turnout was way down this year. Romney has gotten, to this date, fewer votes than McCain in 2008.

As of this writing, Barack Obama has received a bit more than 60 million votes. Mitt Romney has received 57 million votes. Although the gap between Republicans and Democrats has closed considerably since 2008, Romney is still running about 2.5 million votes behind John McCain; the gap has closed simply because Obama is running about 9 million votes behind his 2008 totals.

Of course, there are an unknown number of ballots outstanding. If we guesstimate the total at 7 million (3 million in California, 1.5 million or so in Oregon and Washington, and another 2.5 million or so spread throughout the country), that would bring the total number of votes cast in 2012 to about 125 million: 5 million votes shy of the number cast four years ago.

With this base line, and armed with the exit-poll data, we can get a pretty good estimate of how many whites, blacks, and Latinos cast ballots in both 2008 and 2012. Assuming the 72/13/10/5 percentage split described above for 2012, that would equate to about 91.6 million votes cast by whites, 16.6 million by blacks, 12.7 million by Latinos, with the balance of 6.3 million votes spread among other groups.

Compare this with 2008, when the numbers were 98.6 million whites, 16.3 million blacks, 11 million Latinos, and 5.9 million from other groups.

In other words, if our underlying assumption — that there are 7 million votes outstanding — is correct, then the African-American vote only increased by about 300,000 votes, or 0.2 percent, from 2008 to 2012. The Latino vote increased by a healthier 1.7 million votes, while the “other” category increased by about 470,000 votes.

This is nothing to sneeze at, but in terms of the effect on the electorate, it is dwarfed by the decline in the number of whites. Again, if our assumption about the total number of votes cast is correct, almost 7 million fewer whites voted in 2012 than in 2008. This isn’t readily explainable by demographic shifts either; although whites are declining as a share of the voting-age population, their raw numbers are not.

What is going on ?

So who were these whites and why did they stay home? My first instinct was that they might be conservative evangelicals turned off by Romney’s Mormonism or moderate past. But the decline didn’t seem to be concentrated in Southern states with high evangelical populations.

He has a state map with counties indicated as blue or red. Look at the link.

Where things drop off are in the rural portions of Ohio, especially in the southeast. These represent areas still hard-hit by the recession. Unemployment is high there, and the area has seen almost no growth in recent years.

My sense is these voters were unhappy with Obama. But his negative ad campaign relentlessly emphasizing Romney’s wealth and tenure at Bain Capital may have turned them off to the Republican nominee as well. The Romney campaign exacerbated this through the challenger’s failure to articulate a clear, positive agenda to address these voters’ fears, and self-inflicted wounds like the “47 percent” gaffe. Given a choice between two unpalatable options, these voters simply stayed home.

Maybe this is the answer but I would like more information. The Frank Luntz focus groups showed people switching to Romney from Obama. Maybe these people are so discouraged that they think no one can help. I just don’t know and hope I see a better explanation. I just don’t buy Peggy Noonan’s theory.

That’s why this election is a worse psychic blow for Republicans than 2008, when a confluence of forces—the crash, dragged-out wars, his uniqueness as a political figure—came together to make Barack Obama inevitable.

But he was not inevitable after the past four years. This election was in part a rejection of Republicanism as it is perceived by a sizeable swath of the voting public.

Yes, Mitt Romney was a limited candidate from a limited field. Yes, his campaign was poor. It’s also true that the president was the first in modern history to win a second term while not improving on his first outing. He won in 2008 by 9.5 million votes. He won Tuesday night, at last count, by less than three million.

The minority vote increased a bit but does not explain what happened. I fear we have a country that has given up and passively waits to see what will happen next. They had a chance to get back to some sound principles and with a man who has a good record. For some reason, they chose failure again. I thought Romney ran a good campaign, certainly better than the McCain campaign in 2008. Maybe Marco Rubio would have drawn Latino votes but Rush Limbaugh has pointed out that Reagan’s amnesty in 1986 did not increase the Republican share of the Latino vote in 1988. George HW Bush got 7% fewer Latino votes than Reagan had gotten before the amnesty.

It will be a tough four years.

Tags: Democrats, economics, Obama, politics, Republicans

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