This is the year journalism died. All over the media is spending all day talking about the head of Iran, and refusing to tell Americans the truth about the fallout of Fannie Mae and Freddie Mac.
It started way back during the Carter administration. Jimmy Carter wanted to make it easier for poor people to get loans so they could afford to own a house, so he created regulations to make it so. Most banks didn't take this too seriously.
It wasn't until the Clinton administration that the Fed decided to pressure banks to give out these loans. "If you don't give loans to people who can't afford it, we are going to make your life a living hell."
So then all these people were put into homes that they knew they couldn't afford. And the result was the cost of houses skyrocketed, and thus the housing bubble.
Finally the day came when the bills were do, and all these people who shouldn't have been given loans in the first place were forced to give back their homes through foreclosure. And the housing bubble burst.
And then came the day that the banks collapsed because of of all the fraudulent loans, i.e. Freddie Mac and Fannie Mae.
The Fed -- the very people who caused this crisis -- now thinks it can solve this crisis with more government and more regulations. It seems odd to me that the fed wants to solve a problem of too much regulation with even more regulations. It's like putting oil on a fire.
Instead of taking a problem that was caused by a socialistic problem and trying to solve it by Socializing the Financial system, why not take the opposite approach and allow the market to solve itself?
I say why not, because it was government intervention that ultimately turned the panic of 1929 into the great depression. As I reported before, all the recessions and depressions prior to the Great Depression were short lived. The reason was because prior to 1929, Washington believed it was best to allow the market to fix itself, and it always did fix itself.
Yet, because Washington does not learn from history, it is doomed to repeat it. So now we have the very same people who caused this problem trying to solve it.
Not only has the media NOT told you what I just wrote here, but they have not told you who is really at fault here. It is not George W. Bush, it is liberals. It's Chris Dodd. It's Barny Frank. It's Bill Clinton. It's Jimmy Carter.
Early on in the Bush Administration, it was in 2003 I believe, the White House Warned that a crisis was coming if Congress didn't' to something. Yet liberals in Congress balked.
Barny Frank said, in 2003 following the Bush warning, "Fannie Mae and Freddie Mac are not in a crisis. The more people in my judgment exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see, I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios."
But the media does not tell us this now. There is no analysis of the news in the media. They no longer do their job.
And that's why if we do not do our own investigating we will not learn the truth, particularly about the present financial crisis.
And that, my friends, is the thought of the day.
2 comments:
Excellent, short and to the point primer on this mess! I have to admit, there are a lot of, dare I write this, nuances about all of this that I am reading about. But, one thing is, regretably certain is that there will be some government intervention-a bailout. The only hope is that when Sen. McCain is inaugurated in January he can get through reforms of the Carter-era mess that will put the market more in control rather than the government.
I hope so too. It is very complex. In fact, it's so complex I don't think even economists know how to fix it. We just have to hope that we don't make it worse, like we did in 1929 by tinkering.
Post a Comment