With all the market turbulence, and mediocre economic reports that have come out lately, that old specter ‘the Double Dip’ is yet again being splashed across the headlines. And along with the headlines have come the odds makers—the folks in my profession who like to attach probabilities to economic events.

Earlier this year the US Financial Crisis Commission released a report.With no small amount of irony, a crisis emerged in its inquiry. The majority of the commissioners attributed the credit boom and bust to greedy but incompetent bankers and lazy but ideological regulators.The dissenting commissioners,meanwhile,focused more on poorly designed housing subsidies .Yet while the two groups reached largely polarized views, consensus should have in fact been easy to reach.

The mortgage market in US increased dramatically in size,especially starting late 2003 with sharp growth of the riskier subprime and Alt-A mortgage lending. Since the too-big-to-fail institutions couldn’t compete directly with Fannie and Freddie because of the GSEs’ access to government guaranteed capital and their roughly 40 basis points lower costs of borrowing,they instead moved along the credit curve, dealing in increasingly shaky mortgage loans that the GSEs had difficulty competing.

Striking down a controversial rule at the Port of Los Angeles was another triumph of nasty politics over good policy.