Congress ducks the bullet – lost in election land
Congress is responsible for the housing boom and crash. And Congress has successfully ducked that responsibility. Remember when George W Bush approved congressional legislation that was to “to make homeownership more affordable for lower-income Americans and those with a poor credit history”? The Great Recession started right there.
At the same time, former Fed head Alan Greenspan lowered interest rates in response to a slowing post-911 economy. Greenspan did not account for the Congressional law that deregulated the banking industry. Congress took a heretofore perfectly good banking industry and broke it. Greenspan, playing by the old banking rules, basically threw gasoline onto that fire.
With more low-income workers qualifying for easy money loans, the demand for housing increased. Fewer available homes drove the prices up. Buyers, seeing home prices going up, and up, and up, scrambled to get in. Then builders started building more homes, and more people started building businesses. Banks were under pressure to approve all these new loans. It became a buying frenzy. . .home buyers, home appraisers, lenders, and builders were all participating in an upward spiral of demand.
By 2006 you could buy a home and in six months, it would be worth thirty thousand dollars more than you paid for it. It became popular to buy a low end home, put fresh paint on it, new carpets, trim the hedges and resell it at a profit. A television program aired called “Flip this house” that instructed on how it was done.
Did the banking industry cause this historical event. No. Congress legislated it and the fed made things worse by miscalculating the effects of the legislation.
A government that fails to recognize it’s own mistakes does not deserve to be reelected. It deserves to be fired.
For more information:
The Washington Examiner: Roots of financial crisis in Clinton housing policy
The American Spectator: The True Origins of This Financial Crisis