Williams has another good column out this week, and it quickly sums up – for those of you who missed it – how this economic crisis started back in 1977 with the Community Reinvestment Act. Walter’s point gets right to the root of the problem.
Even though McCain and Obama want to lay the blame squarely at the feet of greedy people on Wall Street, this was not the fault of the free market. It was government providing – instead of promoting – the general welfare.
I’m sure the liberals in Congress cringe when they read this.
The financial collapse of Fannie Mae and Freddie Mac is not a failure of the free market because lending institutions in a free market would not have taken on the high-risk loans.
They were forced to by the heavy hand of government. The solution is not a taxpayer-financed bailout. The solution is to let them fail and allow the people who invested in them, as well as the people who purchased homes they couldn’t afford, suffer the losses. Of course that takes a level of political courage that is in short supply.
There is a problem with this statement. It’s not that I disagree completely, but when the heavy hammer of government forces lending institutions to run business a certain way, it is difficult to just have the government cut and run and let the free market immediately take over. Hence the $700 billion bailout.
The government should have never been involved in the first place.
Ensure you head over and read Walter’s complete column this week.