Nonsequitur: Repeating the Mistakes of Our Past

April 4, 2013

Remember the Great Recession of 2008-2009?  The bursting of a real estate bubble of epic proportions, resulting in a global depression?  Remember how it started?

A liberal President had a very nice idea:  Let’s make it easier for poor people to get home loans.  His advisors knew just how to do it.  Let’s encourage private lenders to accept more risk and lower lending standards by changing government affordable housing policies.  (We can even use GSE’s like Fanny and Freddie to automate valuation and underwriting.)  It worked great for 10 years, sparking unprecedented growth in housing and financial services.  It also grew unprecedented debt loads and risky speculation.

And then everything crashed down around us.  Millions of jobs lost.  Millions of home foreclosures.  Banks failed.  Commodity prices collapsed.  Bankruptcies all over the place.

????????

We worked ourselves out of the recession in late 2009 and into the Great Stagnation, with years of minimal economic growth and unemployment stuck around 8% (not counting the underemployed or those who just gave up looking).   Families found themselves unable to recover their lost property and retirement savings.  What to do about that?

Not to worry.  Our current liberal President has a very nice idea Let’s make it easier for poor people to get home loans.  His advisors know just how to do it.  Let’s encourage private lenders to accept more risk and lower lending standards by changing government affordable housing policies.   (The folks at Fannie and Freddie can hardly wait.)

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One Response to “Nonsequitur: Repeating the Mistakes of Our Past”

  1. […] plans to “stimulate” growth won’t work if the workforce diminishes.  Despite his plans for home ownership, retirees don’t buy homes; they sell them.  His plans to improve transportation […]

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