12 July 2009

The US Government Caused Global Economic Crisis

I know I didn't waant to post while on vacation, but it this report from the House of Representatives admits the government's role in causing the economic crisis we are in. Now we are repeating the same mistakes again, only at a even greater scale. Everyone should read this report. The media will not cover it.

The Role of Government Affordable Housing Policy in Creating the Global Financial Crisis of 2008
STAFF Report Date: JULY 7, 2009
Committee on Oversight and Government Reform U.S. House of Representatives 111TH CONGRESS
Ranking Member Darrell Issa (CA-49), REPORT
INTRODUCTION:The housing bubble that burst in 2007 and led to a financial crisis can be traced back toFederal government intervention in the U.S. housing market intended to help provideHome ownership opportunities for more Americans. This intervention began with twoGovernment backed corporations, Fannie Mae and Freddie Mac, which privatized theirProfits but socialized their risks, creating powerful incentives for them to act recklesslyexposing taxpayers to tremendous losses.
Table of Contents:
1. EARLY History of Fannie Mae and Freddie Mac
2. Fannie and Freddie: WHY THEY DOMINATED THE MORTGAGE MARKET
3. The Politicization of Mortgage Lending
4. Clinton Administration Reforms – CRA and the NationalHomeownership strategy
5. Lower Lending Standards SPREAD AND cause theHousing Bubble
6. SPECIAL INTERESTS: The RISE OF THE “AFFORDABLE” HOUSING COALITION
7. SCANDALS AT FANNIE AND FREDDIE
8. REFORM OF FANNIE AND FREDDIE THWARTED: FOR A PRICE
9. Fallout: taxpayers pay for Fannie’s and Freddie’s Binge on Risky Mortgages10.Learning the Right Lessons:Conclusion
Washington must reexamine its politically expedient but irresponsible approach to encouraging higher levels of homeownership based on imprudently small down Payments and too little emphasis on borrowers’ credit worthiness and ability to repay their loans. Unfortunately, very few elected officials would be comfortable echoing Yale University economist and housing expert Robert Shiller, who writes: The sub prime housing dilemma in the United States points up the problems with Over-promoting homeownership. Homeownership, for all its advantages, is not the ideal housing arrangement for all people in all circumstances.” However, failing to learn the mistakes of our overleveraged binge on mortgage debt will almost certainly doom the country to repeating the same mistakes again and again.