Sunday, December 6, 2009
Thoughts about the current Economic Crisis.
The seed which started the housing debacle started with the government. The Carter administration albeit minor at the time started to set-up loans through HUD for people who could not normally get a loan through a bank because of credit, lack of down payment and ability to pay. This later intensified under Clinton with Janet Reno threatening banks to make loans they would not normally make or be sued by the Justice Department for red-lining. To help with the situation the government gave banks the ability to sell off these loans to Freddie Mac, Fannie Mae or as Mortgage Backed Securities. This went on for years, even with multiple protests from the Bush administration. Barney Frank, Chris Dodd, Maxine Waters and other bleeding heart liberal idiots would hear nothing of it. The bottom line is that this started with the government meddling in private sector. Anything the government gets involved in gets screwed up - the Post Office, Social Security, Amtrak, IRS, Fannie Mae, Freddie Mac, TARP, Stimulus, CDC and the list goes on and on. Now they want Health Care! I can't wait!
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2 comments:
With all due respect, these non-specific points are disingenuous or simply misinformed.
Government involvement in housing began during the New Deal some seventy-five years ago. “Nothing down” as federal policy began with the GI Bill over sixty years ago.
Prohibitions on redlining did NOT call for relaxing standards with respect to credit quality, down payment or ability to pay. Redlining specifically refers to geographical lending restrictions – the collateral, not the borrower, if you will.
Fannie and Freddie were but specks of sand on the Mortgage-Backed-Securities buying beach. They were also late to the party – arguing that they needed to buy the instruments to remain competitive.
Frank, Dodd and Waters were mere back-benchers while the storm gathered in earnest. The Republicans controlled all the levers of power yet never even brought reform to a vote. Fannie and Freddie were very popular on both sides of the aisle, thanks in part to their generous ways with respect to campaign coffers.
Your “bottom line” analysis ignores all of our success in the post-war era. Please name an advanced industrial country that uses your Laissez-faire model with success. I acknowledge that government is less efficient than the private sector per se. That doesn’t mean that the Feds should not be setting the playing field to optimize our economic system. Or, do you prefer the less-government, low-tax policies of Kenya, Paraguay and their contemporaries?
One more point on the subject of the housing meltdown:
HUD, FHA, Fannie and Freddie combined to originate exactly ZERO sub-prime loans. Nada. Zilch. None. 'Twas not government meddling that caused the crisis, rather, a lack thereof.
The private sector, the free market, found a way to package junk sub-prime paper with prime mortgages and were able to sell such securities quickly and at great profit. Many financial players, each competing with the other, demanded more and more of this paper which they could rapidly unload. It worked extremely well, until it didn't.
Blame a lack of oversight as the anti-regulation party held all levers of political control. Don't blame the minority. With power comes responsibility, and the blame falls entirely on today's GOP.
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