a lesson in economics
I was reading an article documenting the fall of Fannie and Freddie May (the banks) and thought it would be a good opportunity to point out a couple things. First, I couldn’t help but notice that the 3 or so specific people the Times article references as sounding the early warning bells were all republicans… Jim Leach, Richard Baker, and Alan Greenspan… which isn’t surprising,but I digress…
What we should all learn from this mess is the consequences of government involvement in the private sector! Look at the consequences! The government gave Fannie Mae all possible advantages… and yet it still failed because the senators that wanted to use it as a social tool could not grasp the underlying economic realities involved with giving loans to unqualified individuals. Look what happens when the desire to “help” an American family “realize the American dream of home ownership”…. You harm EVERYBODY IN THE PROCESS.
This sort of liberal control of the private sector inevitably fails because the short-term interests of politicians are ALWAYS GREATER Than the long-term stability of any government institution. Keep this in mind the next time government wants to RUN HEALTH CARE… or SOCIAL SECURITY…. just remember what happens when a sheltered institution is run by politicians… it’s FAR WORSE than the alternatives… ENRON wasn’t pretty, but it was nothing in comparison to the financial loss under the Government’s watchful eye.
July 22nd, 2008 at 9:51 am
What makes this particular problem even worse was that Fannie and Freddie had the “implied backing” of the US government. So, investors didn’t really scrutinize the investments as much as they should have because the investment itself had virtually no risk of loss.