As markets seem to recover, optimists will engage in increasingly bold displays of ignorance. The San Francisco Chronicle, for instance, seems to think that the median income of the Bay Area is over six hundred thousand dollars per year:
"The proposal would allow Fannie Mae and Freddie Mac to buy loans up to 125 percent of an area's median income - up to $729,750 - well above their current $417,000 limit. While the new limit would vary based upon how expensive an area is, almost all of the Bay Area would automatically merit the $729,750 cap by virtue of having medians above $600,000."
(In fact, the Bay Area county with the highest median income is Marin, hovering around the 100K mark)
At what level of inummerate vulnerability are the middle classes operating? If, as seems likely, there are even more severe losses for banks in 2008, if the housing market continues a steady decline in valuation of up to 30% from its current level (see Merrill Lynch's most recent forcasts), why should we expect there to be any loans for Fannie Mae and Freddie Mac to buy?
At no point is the performative logic of the economy more obvious: if the banks are as wildly, stupidly bullish as small investors are, if indeed they can be stupid together, then they can persist in the fantasy of rising, booming absolute valuation of property. But (and here the deconstruction of the performative is important) this performance, even at the apogee of its self-fulfillment, can never aspire to what we so comically used to call "reality."
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