The government adopted easy credit policies over a number of years to help people who are unqualified to get mortgages. The Community Reinvestment Act is one notorious example. This act required affirmative action (that is, reverse discrimination) in lending because large numbers of minorities were incapable of affording a home. The Association of Community Organizations for Reform Now (ACORN) had their activists trespass on bank property, obstructing bank customers until the banks agreed to loan money to people who were unqualified. Fannie Mae and Freddy Mac lowered their standards, encouraging banks to give out unsound loans (many Republicans proposed regulating Fannie and Freddy to stop this, but Democrats and some other Republicans stopped them from doing so). Most importantly, Alan Greenspan at the Federal Reserve decided to lower interest rates to absurd levels (largely for short-term political gain as President Bush needed the illusion of economic recovery in order to deflect attacks from Democrats over his economic management and Alan Greenspan, of course, is a good Republican who wanted to help out his party).
George W. Bush and the Republicans also deserve portions of the blame. Bush’s American Dream Downpayment Act was part of a trend toward the elimination of downpayments as a safeguard against unqualified people being given mortgages. The bankruptcy reforms of the Bush years also played a role, as creditors were more willing to loan, since they knew that it would be nearly impossible for the debtors not to repay them. As a result, insanity ensued, as a bank issued a credit card to a tree (see: http://www.snopes.com/business/bank/treecard.asp ).
Considering that the evidence clearly shows that the government is responsible for what has happened to our economy, why are many people blaming the free market? Isn’t it time to face the evidence and admit that easy credit brought on by idiotic government policies was the root cause?
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