Government Policy Caused the 2008 Financial Crisis

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."

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.

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

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.

WTF: Terrorism Definition Changed

Ladies and Gentleman, you are deputized as a modern day Paul Revere by continuing to read this information.

Today, we received a notice from the insurance company about terrorism coverage for my business. It begins with a double negative, "terrorism is not excluded from your current policy." The notice also includes some important information.

The definition of terrorism has officially changed:

You are hereby notified that under the Terrorism Risk Insurance Act, as amended in 2007, the definition of act of terrorism has changed. As defined in Section 102(1) of the Act: The term "act of terrorism" means any act that is certified by the Secretary of the Treasury- in concurrence with the Secretary of State, and the Attorney General of the United States- to be an act of terrorism;

What a terrifying bureaucratically malleable definition. The Act was introduced by the newly elected Democrat controlled Congress in June 2007 and signed by President George W. Bush in December. The letter continues...

to be a violent act or an act that is dangerous to human life, property or infrastructure; to have resulted in damage within the United States, or outside the United States in the case of certain air carriers or vessels or the premises of a United States mission;

(except Benghazi, Libya?)

and to have been committed by an individual or individuals as part of an effort to coerce the civilian population of the United States

(into buying health insurance and give up civil rights protected by the Second Amendment?)

or to influence the policy or affect the conduct of the United States Government by coercion.

It seems this definition specifically denies the possibility that someone in government might use terrorist tactics against the citizens of the United States. There are no separation of powers here. The Executive Branch is completely immune from the label terrorist because it decides who is a terrorist.

Creating an economic climate of desolation, inciting racial hatred, promoting class warfare and pushing sexual wedge issues is not coercion when government elites are responsible. The resulting mass shootings are exclusively due to the insanity of the perpetrators. The "gun-violence" is reportedly caused by guns, not desperate, spiritually depraved people pushed beyond their mental stability via hopelessness. Alan Greenspan is no serial killer! (sarcasm)


America has been great because it has been united. The rhetoric of division has all but ended our days of being a United States. The power hungry group who benefits from our division is our politicians.  Most are seduced by the imperial power collected by our executive branch and are consumed by plots to seize the throne.

Remember our history,

The painter Benjamin West wrote that when he talked to King George III during the Revolutionary War, the monarch asked him what he thought George Washington would do if he prevailed.

Return to his farm, West predicted -- accurately, as it turned out.

"If he does that," King George remarked, "he will be the greatest man in the world."

America and individual human freedom need us to remember the example of George Washington. We require leaders who will end the imperial power of government. Leaders purging government workers who resist the imperial agenda as "insider threats" are inadequate.  The most powerful nation on earth calls for the leadership of the greatest person on earth. Character matters.

Rand Paul's filibuster is an example of what must be done. It can be a tide turner.  We must use such examples to remind our countrymen to compare our leaders to George Washington.

More Information:

Wisconsin Commissioner of Insurance notes:

The revised Section 102(1)(A) states, "The term "act of terrorism" means any act that is certified by the Secretary, in concurrence with the Secretary of State, and the Attorney General of the United States—(i) to be an act of terrorism; (ii) to be a violent act or an act that is dangerous to—(I) human life: (II) property; or (III) infrastructure; (iii) to have resulted in damage within the United States, or outside the United States in the case of—(I) an air carrier or vessel described in paragraph (5)(B); or (II) the premises of a United States mission; and (iv) to have been committed by an individual or individuals, as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United States Government by coercion." Section 102(1)(B) states, "No act shall be certified by the Secretary as an act of terrorism if—(i) the act is committed as part of the course of a war declared by the Congress, except that this clause shall not apply with respect to any coverage for workers' compensation; or (ii) property and casualty insurance losses resulting from the act, in the aggregate, do not exceed $5,000,000." Section 102(1)(C) and (D) specify that the determinations are final and not subject to judicial review and that the Secretary of the Treasury cannot delegate the determination to anyone.

Voting Info:

Rep.  Duncan  L.  Hunter: Yea
Rep.  Darrell  Issa: Nay
Rep.  Mike  Pence : Nay