One Two Punch: Mortgage Crisis

October 13, 2009

Thomas Sowell puts on his boxing gloves this morning and lands some quality blows:

Our current economic meltdown results from the federal government, under both Democrats and Republicans, declaring home ownership to be a “good thing” and treating the percentage of families who own their own home as if it was some sort of magic number that had to be kept growing– without regard to the repercussions on other things.

We are now living with those repercussions, which include the worst unemployment in decades. That is the price we are paying for increasing home ownership from 64 percent to 69 percent.

And…

Politicians may not know much– or care much– about economics, but they know politics and they care a lot about keeping their jobs. So a great distracting hue and cry has gone up that all this was due to the market not being regulated enough by the government. In reality, it was precisely the government regulators who forced the banks to lower their lending standards.

Mighty blow…

The other big lie is that this was a failure of economists and others to foresee that the housing boom would turn to bust and set off financial repercussions across the economy.

In reality, everybody and his brother saw it coming and said so– including yours truly in the Wall Street Journal of May 26, 2005.

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