The government, and government policy, is so intertwined with the world of finance that you can't separate the two. Fannie and Freddie back 90% of the home loans in this country right now. 90%! They're not issuing the loans, but they are buying them from mortgage lenders and banks, packaging them into mortgage backed securities, and selling them on the market. They are doing this right now, today, after everything that has happened. The Fed is printing $85BN a month right now, buying government bonds and debt, and much of that is printing is going to pay off the debt accrued by the AIG bailout and all of the toxic assets still on the books. If they're buying and backing 90% of the mortgage debt in this country, do you not think that they should have safeguards in place to check the validity of the loans? Why weren't those safeguards in place before the crash? You can blame whoever you want, but the crash would not have happened if that particular market was free from government interference and meddling. The big banks aren't going to issue risky loans if they know that they can blow up in their face, but if they can issue the loan, loans Fannie and Freddie were begging them to make, and immediately dump the risk off on the American taxpayer, they'll do it in a heartbeat.
If there was no FHA backstop people would have a very hard time getting the credit approval they would need to buy a home. There wouldn't be zero money or 5% down loans like you can still get today. It was a political choice to meddle in the housing industry because a) the realty industry in this country is bananas huge and they spend large sums money on political campaigns, b) construction is the single biggest source of jobs for low skilled males and c) politicians can say that they helped put people in their own home instead of being at the mercy of a landlord. The realty industry marketed the American Dream, but the politicians are the ones that put the system in place that allowed the stupidity to occur.
And you're right, I don't like regulation, because it doesn't work. That's very different from being angry about the SEC incompetently misleading millions of people by utterly failing at their job. People bought the MBS' because they assumed that the SEC had done their job. Those idiots cost millions of people their jobs.
If there was no FHA backstop people would have a very hard time getting the credit approval they would need to buy a home. There wouldn't be zero money or 5% down loans like you can still get today. It was a political choice to meddle in the housing industry because a) the realty industry in this country is bananas huge and they spend large sums money on political campaigns, b) construction is the single biggest source of jobs for low skilled males and c) politicians can say that they helped put people in their own home instead of being at the mercy of a landlord. The realty industry marketed the American Dream, but the politicians are the ones that put the system in place that allowed the stupidity to occur.
And you're right, I don't like regulation, because it doesn't work. That's very different from being angry about the SEC incompetently misleading millions of people by utterly failing at their job. People bought the MBS' because they assumed that the SEC had done their job. Those idiots cost millions of people their jobs.
"Ah, you miserable creatures! You who think that you are so great! You who judge humanity to be so small! You who wish to reform everything! Why don't you reform yourselves? That task would be sufficient enough."
-Frederick Bastiat
-Frederick Bastiat
