Felix Salmon Says: Not Bailout or Bankruptcy But Bailout and Bankruptcy for GM

Republicans Dive Deeper into Fantasy

If there is a prominent reality-based Republican officeholder, his name is Arnold Schwarenegger. Paul Krugman has evidence that there is no prominent reality-based Republican officeholder:

Fannie Freddie Phony: So I was listening to Arnold Schwarzenegger before doing the "This Weak" round table, and he was mostly making sense — except for one thing. He asserted, as a simple matter of fact, that “government created the housing bubble”, because Fannie and Freddie made all these loans to people who couldn’t afford to pay them.

This is utterly false. Fannie/Freddie did some bad things, and did, it turns out, get to some extent into subprime. But thanks to the accounting scandals, they were actually withdrawing from the market during the height of the housing bubble — the vast majority of the loans now going bad came from the private sector.

Yet it’s now clear that the phony account of the crisis — that it’s all due to Fannie, Freddie, and nasty liberals forcing poor Angelo Mozilo to make loans to Those People — is setting in as Republican orthodoxy, part of what you have to believe to be a respectable member of the party.