Sunday, March 17, 2013

Government Policy Caused the 2008 Financial Crisis

Bad History, Worse Policy

A new book by Peter J. Wallison, "Bad History, Worse Policy," reviews the causes of the 2008 financial crisis. We have reviewed the facts of over-regulation and bad economic policy along side our allies at the San Diego Local Order of Bloggers, but this informational and enlightening book brings indisputable facts to fortify our arguments.

We have compiled a key section of Mr. Wallison's discussion into a C-SPAN clip (7m 42s) named "GOVERNMENT POLICY CAUSED THE 2008 FINANCIAL CRISIS."

GOVERNMENT POLICY CAUSED THE 2008 FINANCIAL CRISIS

In the book, I argued that there was never any significant debate about the causes of the 2008 financial crisis.

Although there were two narratives about why it happened, only one of them was accepted and propagated by the media.

In effect the necessary competition and ideas never occurred.

As a result in the policy that was adopted, the Dodd-Frank act, is not soundly based on any political consensus. This will leave the legitimacy of the act in question for the foreseeable future.

The dodd-frank act is based on a narrative developed entirely by the left. It places responsibility for the financial crisis wholly on the private sector and particularly on the large Wall Street commercial and investment banks. To the extent the government had a role in the financial crisis, it was in failing to regulate adequately either those institutions or the mortgage originators who profited by selling mortgages to people who could not afford them.

The book traces the influence of this narrative into the specific revisions of the Dodd-Frank act.

I argue in the book that this narrative is false.

It was bad history and it produced worse policy.
...
Statements made by HUD throughout this period make clear that the agency's intention was to reduce the underwriting standards that were prevailing in the market in order to make mortgage credit available to a larger number of borrowers.

There is no ambiguity about this issue.


When Democrats took control of congress in January 2007, they began implementing policies that made a fragile economy collapse. While Bad History, Worse Policy is not a partisan review of the financial crisis it does explore the fact that government regulatory and housing policy created the housing bubble. When Democrats pursued global warming policy; gasoline, energy, food and other costs across the economy increased. The fragile housing market collapsed as marginal home buyers failed to pay their mortgage.

Democrat Policy 2007-2012

John Allison of the Cato Institute via C-SPAN Clip "DESTRUCTIVE REGULATION AND THE 2008 FINANCIAL CRISIS" (2m 15s):

John Allison Reviews the Causes of the Financial Crisis of 2008
We don't have a private monetary system in the United States, a government own monetary system. By definition, they are caused by government policy and the Federal Reserve has been very creative and in this case Allen Greenspan made bad mistakes because he wanted to go out a hero.

We were having a minor economic correction, he created negative economic rates. Then Ben Bernanke created a new yield curve, because we suddenly had a negative spread, which is a whopping reason this has lasted several years.
The context in which the mistakes were made were really Federal Reserve policies and they got deflected primarily in the housing market, specifically Fannie Mae and Freddie - Freddie Mac and Fannie Mae. Over investment in housing is particularly destructive for housing and that is why this was an unusually big bubble.

It was pushed further, but it was also very destructive because housing is consumption. People don't think of housing as consumption, but you consume a house.  So we incentivized  a massive over-consumption, which is analogous in agriculture to "eating our seed corn," which is one reason we have had such a hard time getting the production process going
W.C. Varones comments upon other impacts from the take over of the financial system in a post titled, "Think Cyprus can't happen here? It already did."
What occurred this weekend in Cyprus was a theft from responsible savers to benefit irresponsible banks.  Small depositors get screwed while bank bondholders (largely other banks and large institutions) get made whole.  Which, it turns out, is exactly what has happened in the U.S. the past five years.

*Note

C-Span has an automated transcription feed at the bottom of the video clips, it does not accurately reflect the statements in the video clips due to errors. If this feed was more accurate, search engines would have an easier time finding the information.

12 comments:

https://www.firstqualityfinance.co.uk said...

While possible if your credit is average to only slightly poor, you will be unlikely to find any loan companies for bad credit that will offer you a loan without a guarantor if you have adverse credit. If you manage to find a lender that offers non-guarantor loans to people with very bad credit histories, it will probably be because the APR is extremely high https://www.firstqualityfinance.co.uk.

http://www.a1credit.sg said...

I had the best experience with him, while shopping and being provided with a home loan. . A top notch professional in the business, I would say. A1 Credit very consistent, courteous and prompts... so glad to have Anthony help me with a fast closing loan now and in the near future with another loan, as I will definitely be doing business with Mr. Carroll again!

click here said...

Its an amazing device which has helped all of us to teach our kids regarding money, and how to be responsible by using it. Go Henry has a web site along with complete confirming and a simple to use interface with regard to establishing the actual guidelines for every kid. I can effortlessly setup controls as well as considerations and they can only spend what I permit them to spend click here…

pete reeves 1st uk said...

Pete reeves 1st UK Home loans for the Self Employed with poor credit are attainable. When you show your income, dependability to repay as well as pass the actual affordability inspections that companies are required to conduct, yes you can get approved. Despite poor credit recommended this particular to all…

secured loans said...

Great people & secured loans company in order to, the interest will always be greater along with a bad credit score financial loans, whether or not they are short term or long-term loans; it is because there is a and the higher chances component incorporated for your loan provider so the interest shows this particular. Is a poor credit rating loan providers have a phase where ever they cannot cater to borrowers.

Unknown said...

I actually found this blog and that is amazing thing I enjoy reading this easy to understand stuff. Keep it up.poker online

Qualitas Payroll said...

Qualitas associated with regulates and processes imply these people spend more of the period invested in your own payroll processing in advance. These types of controls include detailed customer data input reconciliation controls, logical review and impartial inspections upon every payroll cycle.

Simon Jones said...

Yes, government policy was massively to blame, but so were the hoards of corrupt banking and real estate professionals whose greed knew no boundaries.

here said...

With rates which are typically 1-2Percent superior to the top banking institutions and loan companies, our company is confident that we should be able to offer your small business the most effective professional trade rate. The truth is, our company is so certain that we actually have a best rate assure for the professional and also exclusive customer here.

william oscar said...

I’m trampled by your contents carry on the wonderful work.

Accounting Firms in Toronto

Sarah Cook said...

The problem is that you provide may be worth our time and also effort.Scott Lanzon Attorney

shane lee said...

Equity can be defined simply as the difference between your home's value and the amount you currently owe on your mortgage loan Leasing! Refinance

ShareThis

Ads

LinkWithin

Related Posts Plugin for WordPress, Blogger...