Too much Fed credit encouraged too much building, so prices ballooned past their economic values on the effluvium of degenerating derivatives. Now, we have foreclosures, upside-down homeowners, devalued and disappeared mortgage-makers, failed and failing banks, and a cesspool of phony investment values camouflaged by a carpet of Federal fun dollars now owed by the taxpayers. How come?
Because Congress pimped out the home mortgage industry and the Fed financed the business. First, Congress; we'll leave Fed credit faucet Greenspan's enabling for another time. GO BACK TO 1977 AND SEE PASSAGE OF THE COMMUNITY REINVESTMENT ACT (CRA) BY COMPASSIONATE LEGISLATORS USING OTHER PEOPLE'S MONEY TO HELP POOR FOLKS WHO COULDN'T AFFORD TO BUY HOMES.
Go way back in 1950, and people thought lenders were entitled to repayment and shouldn't lend to folks who couldn't repay. Mortgage lenders demanded good credit for loans in slums where credit was risky and property wasn't worth foreclosing; they outlined those areas on their maps, calling it redlining an area.
PROGRESSIVES CALLED IT PUNISHING THE POOR. THEY FELT POOR PEOPLE WITH BAD CREDIT WERE AS MUCH ENTITLED TO HOME OWNERSHIP AS ANYBODY. Earlier public housing was often trashed by residents; the hope was they wouldn't trash what they own….
IT WAS half sad, half funny. After weeks of failing to reach an agreement on a budget, after getting the country all worked up about a shutdown, the speaker of the House and Senate majority leader and President took to the airwaves late Friday night to herald their great achievement in cutting $38 billion, calling it a historic compromise.
DEMOCRATS - WHO NOT LONG AGO WERE WARNING US THAT SIGNIFICANT NEAR-TERM BUDGET CUTS WOULD COST JOBS - PRETENDED IT WAS SOME KIND OF VICTORY FOR THEM.
WRONG. THIS BUDGET DEAL IS A MAJOR WIN FOR THE REPUBLICANS. Like the President's concession on extending the Bush tax cuts for top-income earners, it's confirmation that the GOP currently controls the terms of this debate.
They promised they'd get billions in cuts this year, and that's precisely what they delivered.
Democrats never offered a clear alternative to the unsweetened tea.