Why the Bubble Burst - Robert Binotto
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.
I remember when the government was cracking down on "discriminatory" lending practices. This is a must-read article, he dots all the I's and crosses all the T's. If you were old enough, you remember how this went.
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