Why did those mortgage loans get written and approved for people who could not pay? Does that sound like something that business people would just decide to start doing on their own?
Or, perhaps government was interfering again, attempting to impose racial and socioeconomic justice on the housing market with the CRA, Fannie & Freddie underwriting all sorts of bad paper, and looking the other way as thousands of “liars’ loans” were approved every day. Nobody cared about the quality of the loans because Fannie & Freddie were buying up the paper.
Government interference is a major cause of misallocations in the marketplace. When the government is the backstop, all manner of misallocations occur, as we are seeing now in the “green jobs” fiasco that Obama has been pushing. Billions of dollars wasted by government, and bet that Obama brings up the need to waste billions more in his speech Thursday.
