by Walter E. Williams
Suppose you saw a building on fire. Would you seek counsel from the arsonist who set it ablaze for advice on how to put it out? You say, “Williams, you’d have to be a lunatic to do that!” But that’s precisely what we’ve done: turned to the people who created our fiscal crisis to fix it. I have never read a better account of our doing just that than in John A. Allison’s new book, “The Financial Crisis and the Free Market Cure.”
Allison is the former CEO of Branch Banking and Trust, the nation’s 10th largest bank. He assembles evidence that shows that our financial crisis, followed by the Great Recession, was caused by Congress, the Federal Reserve, Freddie Mac and Fannie Mae and was helped along by the Bill Clinton, George W. Bush and Barack Obama White Houses.
The Federal Reserve, under the chairmanship of Alan Greenspan, created the massive housing bubble by over-expanding the money supply. President Bush and members of Congress, through the Community Reinvestment Act, intimidated banks and other financial institutions into making home loans to people ineligible for loans under traditional lending criteria. They became subprime lenders. Lending institutions made these loans, now often demeaned as predator loans, because they knew they’d be sold to government-sponsored enterprises (GSEs) Freddie and Fannie.
The GSEs had no problem taking this risky path, because they knew that Congress would force taxpayers to bail them out. Current Fed Chairman Ben Bernanke is following in the footsteps of his predecessor by massively expanding the money supply by purchasing Treasury debt. He is creating prime conditions for a calamity by the end of this decade.
Then there were the crony capitalists, among whom are Goldman Sachs, Citigroup, Countrywide, Bear Stearns, JPMorgan Chase, General Motors and Chrysler. These and many other companies, through the thousands of Washington lobbyists they hire, are able to get Congress to shortcut market forces. Free market capitalism is unforgiving.Details