America’s leading and most prolific intellectual necessarily and succinctly debunks the convenient Beltway mythology:
…. The idea is that it was a lack of government supervision which allowed “greed” in the private sector to lead the nation into crises that only our Beltway saviors can solve.
What utter rubbish this all is can be found by checking the record of how government regulators were precisely the ones who imposed lower mortgage lending standards.
It was members of Congress (of both parties) who pushed the regulators, the banks and the mortgage-buying giants Fannie Mae and Freddie Mac into accepting risky mortgages, in the name of “affordable housing” and more homeownership. Presidents of both parties also jumped on the bandwagon.
Most people don’t have time to spend digging into the Congressional Record and other sources to find out the ugly truth being covered up by the blizzard of lies coming out of Washington and echoed in much of the media. But my research assistants do that for a living, and it is all presented in a book of mine titled “The Housing Boom and Bust” that has just been published.
When the housing boom was going along merrily, Rep. Barney Frank was proud to be one of those who were pushing Fannie Mae and Freddie Mac into more adventurous financial practices, in the name of “affordable housing.”
In 2003 he said:
“I believe that we, as the federal government, have probably done too little rather than too much to push them to meet the goals of affordable housing and to set reasonable goals.”
“I want to roll the dice a little bit more in this situation towards subsidized housing.”
In other words, when things were looking good, he was happy to acknowledge the role of the federal government in pushing the housing market in a direction it would not have taken on its own.
But, after the risky mortgage-lending practices fostered by government intervention led to massive defaults and foreclosures that caused financial institutions to collapse or be bailed out, Frank changed his tune completely.
….. Although this is the biggest housing disaster the government has ever produced, it is by no means the first. Republicans intervened in the housing markets to promote more homeownership in the 1920s, Democrats in the 1930s, and both parties after World War II. All of these interventions led to massive foreclosures.
Don’t politicians ever learn? Why should they? What they have learned all too well is how easy it is to get credit for promoting homeownership and how easy it is to escape blame for the later foreclosures and other economic disasters that follow.
Sowell is right that too many Republicans went along for the Fan and Fred ride. But that correct assertion doesn’t change the fact that the Community Reinvestment Act was an “inspiration” of Jimmy Carter and a post-Watergate Democrat-controlled Congress, or that Fan and Fred’s loosening of credit standards occurred during the Clinton Era while those two entities were run by Democratic cronies who were as corrupt as they come.