What have we learned from the financial crisis? The mainstream media are talking about the greed of Wall Street and wild capitalism as the root cause of the financial mess we are in. Very few of them acknowledge the role of politicians and collectivist government intervention. "Beware of trying to do good with other people's moeny." says Russell Robert economic professor at George Mason University in this Wall Street Journal article.
This time the politicians have been eve smarter. They didn't spend the money themselves but since 1992 Congress pressed the biggest national morgage lender Fannie Mae and Freddie Mac to increase the percentage of mortgages going to low–income borrowers:
In 1996 the Department of Houseing and Urban Development (HUD) gave Fannie and Freddie an explicit target — 42 percent of their mortgage financing had to go to borrowers with income below the median in the their area; the target increased to 50 percent in 2000 and 52 percent in 2005.
Also in 1996, HUD required that 12 percent of all mortgage purchases by Fannie and Freddie be "special affordable" loans, typically to borrowers with income less than 60 percent of their area's median income.
Between 2000 and 2005, Fannie and Freddie met those goals every year, funding hundreds of billions of dollars worth of loans, many of them subprime and adjustable–rate loans, and made to borrowers who bought houses with less than 10 percent down.
That is why the same people that brought us this mess, the US Congress, have had to bail us out. We need to ensure that there is no "next time" by insuring that they can never again play around with other people's money!
