US House Report: Federal Govt Behind Financial Meltdown

There’s a report you need to read regarding the economic meltdown that came to a head last year.  Let me say it again, there is a report you really need to read regarding last year’s financial and economic meltdown.

You really need to read it because of all the propaganda and outright lies that have been peddled by Democrats and their accomplices in the “mainstream” media since then. Liberals have tried to tell us that it wasn’t government meddling that led to the meltdown…it was really lack of government regulation. (Which is like saying, “When the service station exploded, it wasn’t the ignition of the gasoline in the tanks that led to the explosion, it was really that there wasn’t enough gasoline in the tanks)

The lies passed off in the past year have been truly astounding in their brazenness. Oh, there’s a grain of truth here, as there usually is in order to make a lie more believable.  There was indeed a shortage of government oversight…but it was in the oversight of government lending agencies, not in the private market.

As I and others have pointed out time after time after time after time after time after time since the meltdown, Democrats repeatedly refused to provide greater oversight and control of the government lending institutions of Fannie Mae and Freddie Mac.  This lack of oversight led to incredible recklessness from these major players in the lending industry which destabilized the entire market.  The politically correct requirements the government placed on the private market, forcing them to make risky loans to politically correct groups, only added to the problem.

Now we have an official government report which issues findings that back up what we already knew.

The Heritage Foundation has posted a report from the U.S. House Committee on Oversight and Government Reform entitled “The Role of Government Affordable Housing Policy in Creating the Global Financial Crisis of 2008.”

The introduction to the report encapsulates quite well the monumental government incompetence that led to the meltdown:

The housing bubble that burst in 2007 and led to a financial crisis can be traced back to federal government intervention in the U.S. housing market intended to help provide homeownership opportunities for more Americans. This intervention began with two government-backed corporations, Fannie Mae and Freddie Mac, which privatized their profits but socialized their risks, creating powerful incentives for them to act recklessly and exposing taxpayers to tremendous losses. Government intervention also created “affordable” but dangerous lending policies which encouraged lower down payments, looser underwriting standards and higher leverage. Finally, government intervention created a nexus of vested interests – politicians, lenders and lobbyists – who profited from the “affordable” housing market and acted to kill reforms. In the short run, this government intervention was successful in its stated goal – raising the national homeownership rate. However, the ultimate effect was to create a mortgage tsunami that wrought devastation on the American people and economy. While government intervention was not the sole cause of the financial crisis, its role was significant and has received too little attention.

No, the meltdown was not caused entirely by the government incompetence. There was more than a little greed and incompetence from the private market as well. Unfortunately, the limited role government has in safeguarding against egregious abuses in the market was totally negated by the fact that the federal government was leading the charge and setting the example for that greed and incompetence.  Dirty cops don’t make good enforcers of the law.

From CNS News:

“That is the perfect smoking gun that tells how Barney Frank [D-Mass.], the Clinton administration and others would do it in those days,” Rep. Darrell Issa (R-Calif.), the ranking member on the House Oversight and Government Affairs Committee, said Tuesday in a speech at the Heritage Foundation.

“The seeds of the meltdown began with the well-intentioned goal that everyone have a home even if they can’t afford it,” he said. “It led to one of the biggest ponzi schemes ever.”

Fannie Mae and Freddie Mac made 54 percent of the “subprime” mortgage loans from 2002 to 2007, or about $1.9 trillion in mortgage loans to borrowers with credit scores lower than 660.

For one or two entities (really just one: the federal government) to hold a 54% sway over this section of the market is absolutely huge–both in it’s implications concerning our limited government way of life in American, and in impact on the market when that entity acts recklessly. And act recklessly it did.

As the report points out, it created a dangerous mix between the private market and public government policy, “privatiz[ing] their profits but socializ[ing] their risks.” In other words, this government entity reaped the profits of the private market (which made the government-appointed administrators who ran it very wealthy), while running all that risk of their recklessness at the expense of the taxpayer.

In other words, they knew they could afford to act more recklessly than the private market because they had the deep pockets of the American taxpayer to back them up and bail them out.

The report is 26 pages long, but I encourage you to read it in it’s entirety. I doubt you’ll hear any of it from the “mainstream” media.

If ever there was a powerful argument for getting government out of the business of private business (in every area), this incident illustrates it in astonishing clarity.  It is absolutely vital for the health of our republic (as well as our freedom) to return our nation to the limited government roots we were founded upon, and that our Constitution dictates.

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