The Economic Crisis Was Designed in Washington, Not New York

by Crocker on October 24, 2011, 1:49 pm

in Economics,Politics

Cato’s Tom Palmer has the correct take on the Occupy Wall Streeters’ grievances.

What caused the crisis, the indebtedness, the unemployment, the stagnation? The culprits are state agencies and enterprises, including our Federal Reserve (our government’s bank), Federal Housing Administration (FHA), Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac), which jointly flooded the country with cheap credit and encouraged and subsidized unsound banking and subprime mortgages, all to encourage wider home ownership, paper prosperity, and cozy relationships with their cronies. We got a housing bubble, mountains of unpayable debt, and a financial crisis. Thanks, Uncle Sam.

The Occupiers have the wrong address. The subprime crisis was designed in Washington, not New York.

Back in 2008, Saturday Night Live did a great skit that caught the gist of the crisis and the cronyism that lay behind it. Clearly, the writers knew their current events. The point being that it all began in Washington, with policies that created a set of perverse incentives, the outcome of which were perfectly predictable to anyone with any knowledge of history.

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