Big Government's Big Role in the Credit Crisis
"The private market screwed itself up, and they need the government to come help them unscrew it." So says Barney Frank, chairman of the House Financial Services Committee. Did Wall Street make mistakes? Absolutely. But so did our fellow Americans who took out loans that they shouldn't have.
And so did Uncle Sam. The more you look at the history of the housing-spawned credit crisis, the more you notice Uncle Sam popping up, Zelig-like, in every scene. Fannie Mae and Freddie Mac were government-birthed entities that decided to buy securities tied to subprime loans. And it was government officials on Capitol Hill, the recipients of millions in campaign donations from the F&F lobby, who decided not to rein in those entities. You had the government ' s Community Reinvestment Act nudging banks to make unsound loans. Government banker Alan Greenspan pushed interest rates too low for too long earlier this decade, creating an extreme financial situation that made the crazy Wall Street strategies look temporarily reasonable. And for decades, government has pushed higher homeownership as a national goal, via F&F as well as through the tax code, siphoning off resources that might have been better devoted to other economic sectors.
And now, folks like Barney Frank pretend government just showed up on the accident scene moments ago like an innocent passerby who wonders aloud, "Anyone here know what happened? Anyone?" I mean, how can we try to prevent future financial crises, or least minimize their damaging effects, if we delude ourselves on the causes of the current one?
Tags: credit | stock market | government intervention
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Reader Comments
Hey, what color is the sky in your world?
Ignore the lending standards disappearing, the unprecedented ly low interest rates, the radically deregulated market -- that's all irrelevant. Its the CRA
Is everything just a talking point, or does reality matter at all?
The GOP as I knew it -- smaller government, lower taxes, balanced budget, strong military, minimum overseas involvement except where absolutely necessary -- is now long gone. You guys killed it. Reality doesn't matter. The far right has hijacked what was once an honorable institution, and turned it into a parody of itself.
The GOP is lost, the fiscal conservatives no longer matter, and the religous zealots and far right control the party.
I SUGGEST YOU FIND A HEAPIONG PILE OF REALITY AND DAMN QUICK OR THE REPUBLICAN PARTY WILL TAKE MANY YEARS TO RECOVER
You guys deserve to wander in the desert for 40 years . . . (hey, a biblical reference!)
congress
The government is run by immature self centered people. They are concerned with one thing and one thing only :Re Election. It is clear they are squandering tax dollars for their own agenda not the agenda of citizens.
Distortion
Problem with this type of reasoning is it lumps different people and different laws/regulations together as 'government'. It's like talking about 'the media' like it is a single entity. There were many irresponsible actors that led to this mess, not one. At every level from unqualified borrowers taking doomed to fail loans pushed by deceptive brokers all the way up to the investors who ignored the problems inherent in speculating of complicated credit derivatives. But while we're on the topic of government let's not forget things like the
Gramm-Leach-Bliley Act
and
Commodity Futures Modernization Act
that allowed banks to get so big and for everyone and anyone to enter the credit default swap markets with totally irresponsible leverage.
Yep, it's easy to blame 'the government' or 'the media'. It's much harder to set down the blame finger for a moment and understand all the elements of the current crisis.
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