Saturday, October 04, 2008

The Government's Significant Role in the Causes

I wish we had more people in the media documenting the negative role of government interventions in the housing and mortgage industry and in particular the supportive role that government actors played in creating this whole mess. Right now, populist opinion is heavily weighing against the greed and predation of private enterprise and thinking that government regulation will be our saving grace. Please let's not let that pendulum swing too far.

Tom Sowell had a nice piece today, "Do Facts Matter?" where he points out the role of Fannie and Freddie in buying subprime and Alt-A mortgages, and the strong lobbying by various politicians for easy credit.

Fannie and Freddie did indeed buy hundreds of billions of MBS created from subprime and alt-A trusts. Without the easy money from these government-sponsored entities, with their clear US taxpayer guarantee and subsidy, the housing market would definitely have been less heated. I won't lay all the blame on their doorstep, but they share in it heavily, and this should make rational people remember that while markets are not perfect neither are political regulatory mechanisms. We still await that legendary benevolent dictator -- and it appears that Paulson will not have his chance at the job!

1 comment:

Anonymous said...

How come McCain or Palin aren't talking about this? It seems like they have had plenty of opportunities. Instead they let the democrats hammer them for wanting more deregulation. Politics doesn't have to be about rhetoric only, some of us appreciate common sense.