The latest Business Week also includes more market bashing, this time in the form of a book excerpt from Roger Lowenstein?s The End of Wall Street:
The Fed greatly abetted speculation in mortgages by keeping interest rates too low. Meanwhile, the willingness of government to abide teaser mortgages, “liar loans,” and home mortgages with zero down payments, amounted to a staggering case of regulatory neglect.
The government’s backstopping of Fannie and Freddie, along with the federal agenda of promoting homeownership, was yet another cause of the bust. Yet for all of Washington’s miscues, the direct agents of the bubble were private ones. It was the market that financed unsound mortgages and collateralized debt obligations (CDOs) that spread their contagion globally; the Fed permitted, but the market acted. The banks that failed were private; the investors who financed them were doing the glorious work of Adam Smith.
In addition to reading Thomas Woods? Meltdown, a perusal of Thomas Sowell?s book on the housing boom and bust should help disabuse you of the notion that the market ? left on its own ? would have created the problems toward which government steered us:
The current economic crisis itself grew out of politicians intervening in businesses and markets, making decisions for which they have neither experience nor expertise, much less a stake. To extend the same principle to other sectors of the economy is to invite a wider disaster, rather than an end to the current crisis. Asserting a right to do is completely beside the point ? which is whether the country will be better off or worse off if politicians continue the pattern of interventions that brought on the current economic problems in the first place.
