Spoke Too Soon

In my last blog: here, I sung the praises of Bush's tenure. Indeed, up until two week ago, it looked as though we were poised for only a mild slow down. Today, a recession seems more inevitable. And a financial crisis looms heavy on all our minds. My last blog isn't nullified of course. The last decade was filled with opportunity. Everyone I know has improved their lot in life. I thank God for those seven years of plenty.

But now I must admit that one of the measures I touted as a Bush accomplishment was in fact a primary cause of this crisis: the high rate of minority home ownership. This was a double edge sword. The cost of boosting home ownership was too great.

A Problem With Many Root Causes

I've been researching this topic and so far I've found the following causes. (See this Denver Post article and this WSJ article) Some of the causes had both beneficial as well as deleterious effects. In no particular order:

1. Enactment of laws that encourage home ownership (most notably, the CRA of 1977 and the 1993 expansion of it)
   
2. Political pressure on Fannie and Freddie to buy/guarantee subprime loans. Followed up by lax oversight.
   
3. Deregulation of banks which allowed them to get too big and have too high a debt load
   
4. Overregulation of banks which give them a false sense of security.
   
5. Low interest rate policy of the Fed which fueled mortage debt.
   
6. Predatory lending practices.
   
7. Government created credit-rating oligopoly (providing the market with misinformation)
   
8. Short Sellers
   
9. Government Debt

And the human side (which will never change)

1. Home buyer and consumer imprudence
2. Greed (from investment bankers and regular joe investors alike)
3. Human tendency to underestimate downside (The economy of Las Vegas is based on this fact)
   

But wasn't it due to the "Failed Policies of the Bush Administration"?

When Obama says this, I'm not sure what specific policy he refers to. There is plenty of blame to go around. If you want to play the blame game, Democrats are knee deep in it too. This video, if a bit propagandist, is still a must see for those who believe Democrats are saints:

A History of the Financial Crisis

As the history books will no doubt explain, the financial crisis of 2008 was caused in large part by government's penchant for liberal activism.

Rersources

A Mortgage Fable

Clinton Defends Glass Steagall

Fannie Mae's Political Contributions

Wall Street's Political Contributions

McCain's Attempt to Reform Fannie Mae

Central Banking's Role

Community Reinvestment Act (CRA)

Pro-CRA Articles
CRA not to blame CRA didn't affect 80% of subprimes
Anti-CRA Articles
Loose Underwriting