Walter Williams: The Government, Not The Market, Created Our Financial Crisis

IBD ^ | 12/13/2012 | Prof. Walter Williams

[SeekAndFind]

Suppose you saw a building on fire. Would you seek counsel from the arsonist who set it ablaze for advice on how to put it out?

You say, "Williams, you'd have to be a lunatic to do that!" But that's precisely what we've done: turned to the people who created our fiscal crisis to fix it. I have never read a better account of our doing just that than in John Allison's new book, "The Financial Crisis and the Free Market Cure."

Allison is the former CEO of Branch Banking and Trust, the nation's 10th largest bank. He assembles evidence that shows that our financial crisis, followed by the Great Recession, was caused by Congress, the Federal Reserve, Freddie Mac and Fannie Mae, and was helped along by the Bill Clinton, George W. Bush and Barack Obama White Houses.

The Federal Reserve, under the chairmanship of Alan Greenspan, created the massive housing bubble by overexpanding the money supply. President Bush and members of Congress, through the Community Reinvestment Act, intimidated banks and other financial institutions into making home loans to people ineligible for loans under traditional lending criteria. They became subprime lenders.

Lending institutions made these loans, now often demeaned as predator loans, because they knew they'd be sold to government-sponsored enterprises (GSEs) Freddie and Fannie.

The GSEs had no problem taking this risky path, because they knew that Congress would force taxpayers to bail them out. Current Fed Chairman Ben Bernanke is following in the footsteps of his predecessor by massively expanding the money supply by purchasing Treasury debt. He is creating prime conditions for a calamity by the end of this decade.

[driftless2]

Yes, but the fact remains all the funny business was started in the Clinton admin. No Clinton admin forcing banks to take on bad loans which resulted in shaky derivatives and securties, and no eventual financial crisis. Read Sperry’s book. Clinton is the arch-criminal mastermind in the whole thing.

[Wolfie]

The derivatives market is still alive and well, even after the problems with them were exposed. And yeah, sub-prime mortgages were a bad idea. But it took the financial geniuses of Wall Street to turn firecrackers into atom bombs.

[driftless2]

The fact remains, no matter how many crooks on Wall Street, none of it would have happened if the Clinton admin hadn’t got the ball rolling.

[Wolfie]

It wouldn’t have happened with sub-prime mortgages, but it would have happened with derivatives based on something else.
If the derivatives market crashes again, we’re well and truly screwed. And it has nothing to do with housing.

http://www.freerepublic.com/focus/f-news/2965885/posts

[FreedomPoster]

We bought our 2nd house in the middle of the Clinton era, and looking back on it, there were warning signs of what was to come with the ease with which we got that mortgage, as compared to our first house in the mid-80s. We were flabbergasted that they almost would have made the loan on the 2nd house on my income alone; we would have never considered it. Unfortunately much of the U.S., including all of Washington DC, isn’t as financially prudent as we are.

[driftless2]

You’re wrong... read Sperry’s book, “The Great American Bank Robbery.”