As has been pointed out before, it ain’t rocket science, and here’s an unusually succinct statement of the problem, and incisive commentary on the bailout.
The bursting of the housing bubble — which in turn precipitated the collapse of the financial and credit house of cards — is entirely government-made. Point fingers where you will, but I point mine at those congressmen and administrations that sought to win popular support by turning the Federal Reserve System, Fannie Mae, and Freddie Mac into public reservoirs of easy credit and home loans, available even to the riskiest and most credit-unworthy of borrowers. For years, the federales have artificially lowered interest rates and opened the loan spigots for institutional borrowers which — under inducements and even statutory pressures — opened their credit spigots, in turn, for just about any and every would-be homeowner. The usual tests of credit-worthiness that typically govern lending practices in a free, competitive marketplace were recklessly abandoned — sometimes under “moral” claim that rigorously screening prospective borrowers is “discriminatory.” So, lending has become increasingly indiscriminate, especially in the sub-prime, adjustable-rate-mortgage market.
Here’s a little more history, for those who need it, on the road up to the current problems.
Continue reading “Why the Bubble Burst: bumped, with refreshed links”
