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Email this2:18 pm
December 17, 2016
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From the National Post -
Terence Corcoran: Don't blame 'rich' bankers for the 2008 global crash. Blame socialism
Between 1995 and 2007, trillions of dollars flowed into housing people couldn't afford, leading to the subprime-mortgage meltdown
In her book on Fannie Mae and Freddie Mac, government-sponsored mortgage enterprises at the heart of the crisis, McDonald documents the populist political origins of the housing and mortgage policies that fostered the subprime-mortgage meltdown that led to Lehman’s collapse and the subsequent stock-market crash. She pinpoints 1995 as the launch toward the crisis. That’s when then president Bill Clinton outlined his “National Home Ownership Strategy,” or what McDonald refers to as “the affordable housing ideology.”
In Clinton’s words: “This is the big deal. This is about more than money and sticks and boards and windows. This is about the way we live as people and what kind of society we’re going to have.” George W. Bush later expanded that effort with a program called “Blueprint for the American Dream” of home ownership.
Massive national institutional resources — government and private — were ultimately corralled and coerced into government-mandated programs that were ultimately designed to provide mortgages to people who had no money to make down payments and insufficient income to carry a mortgage. Between 1995 and 2007, trillions of dollars flowed into housing people could not afford.
[...]
In the end, the bailouts were not examples of “socialism for the rich.” The root cause of the 2008 financial crisis was a massive and misguided decade-long succession of policy manipulations aiming to provide backdoor redistribution to the poor. The objective was to funnel capital to fund mortgages and housing for people who could not afford them.
The crisis of 2008 was not a product of capitalism or markets or the inherent greed of bankers. It grew out of populist political posturing and manipulation of the market economy to attain social objectives. It was a colossal failure of socialism for the poor.
11:04 pm
October 29, 2017
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It was also about greed too, though! Banks made many of those mortgages and not just The two government run institutions.
Banking used to be "simple and boring", no bank would ever lend to low income people or to high credit risks. The bankers dropped their moral compasses too.
Furthermore, you have to also blame the stupidity of people buying what they can't afford. People need to take responsibility for their actions.
11:32 am
October 27, 2013
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Bloomberg had a special on yesterday (14th) on the 10th anniversary of the Lehman Bros collapse. Former mostly European bank CEOs, among other regulators of influence, were interviewed on their impressions of the cause of the collapse and what could have been done differently in the response to the crash.
At least 2 of the interviewees mentioned the reckless socialist experiment by political entities of easy consumer/home lending as the primary root of the crisis. Lender greed also played a role but it seems even the best and the brightest are influenced (or cajoled) by governments to help implement policy.... and thus became the facilitators.
There were mixed opinions on whether the US should have let Lehman go bankrupt. The bankruptcy exacerbated the liquidity crisis but on the other hand, it was used as an example of 'teaching' the banks a lesson on 'moral hazard', i.e. don't count on being bailed out.
It could all happen again but it will be a different trigger, and the most common suggestion was corporate and/or government debt. And the timing could be just a few years away.
5:55 pm
September 11, 2013
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This Clinton stuff was known back then to the informed few, I remember a lawyer family member explaining it to me shortly after the crash. Clinton and Democrats were just fomenting the now-even-more-widespread notion that everybody is entitled to a certain standard of living (which for Clinton included home ownership) just for being a living human. A recent iteration of the same concept is guaranteed income, which of course will never be enough for people to "retain their dignity", etc so will always have to be adjusted relatively higher. These pretty-much-communist (all are equal, nobody fails, everybody gets a ribbon, one class society) notions are now embedded in young peoples' ideas of what is just, so in my view a series of financial crises will accompany capitalism's end in the West. Of course it will involve debt, but despite some folks' predictions the trigger is usually something out of left field that only a few saw coming that then spreads extremely quickly into all areas of the financial system.
7:06 pm
August 9, 2014
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If the government do truly want to achieve a higher home ownership rate and make housing more affordable, they should reduce the hurdle for development of new housing unit and urban renewal in order to increase supply of housing.
5:30 am
December 17, 2016
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For the record, there is no such thing as affordable housing - when governments and individuals bandy about that term THEY really mean taxpayer subsidized housing.
And Bill, with reference to your "one class society" - IF you're taking pre-orders - I"ll take one of those grey suits in a 44 Tall, thanks.
12:23 pm
August 9, 2014
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Top it up, you are misinterpreting what I try to say. (And make a wrong judgement of me and my character.)What I am saying is government and its regulation on development is the reason why the supply curve of housing become very inelastic, implying that government is making new development difficult and cause the high housing price we face.
P.s: Why is my previous post edited? I personally does not perceive it to be insulting.
6:40 am
July 6, 2017
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Blaming the financial crisis on socialism is I'd say, a bit of a stretch. The aspirational tone of the home ownership dream has more to do with the idea of American exceptionalism than any concept of socialism. As has been said, there are no poor people in America, only momentarily disadvantaged millionaires. If however, as Mr Corcoran states, the "home for all" concept is socialism then I'd suggest it was used merely as cover for the predatory lending that ensued.
It reminds me in an odd way of the Nixon administration getting the restaurant industry and the farm lobby together in the '70's, the end result being "larger portion sizes for all". Unfortunately for the food industry they discovered that unlike debt, people can only take on so much, so now they must fight for (and I love this phrase) "stomach share".
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