The Housing Boom and Bust: Revised Edition by Thomas Sowell

Author:Thomas Sowell [Sowell, Thomas]
Language: eng
Format: epub, pdf
ISBN: 9780786747559
Publisher: Perseus Books Group
Published: 2010-02-01T23:00:00+00:00

THE MARKET VERSUS GOVERNMENT DEBATE

In the wake of the housing market collapse in 2006, and its repercussions in financial markets and in the economy as a whole since then, there have been heated controversies over the role of the Community Reinvestment Act. This has been part of a much wider debate over whether it was an unregulated free market or the government that was primarily responsible for the housing boom and bust, with its disastrous consequences for the economy. Those who say that it was defects in free market capitalism that brought on the economic problems, such as Professor Richard A. Posner in his book A Failure of Capitalism, say that neither the Community Reinvestment Act nor the loans made under it had a major role in the economic downturn. Even the role of Fannie Mae and Freddie Mac in the economic disaster was attributed by Professor Posner to their being private enterprises:Both companies got entangled with the lower-grade mortgage-backed securities and were collapsing in September 2008 and were taken over by the government. But although federally chartered, they were until then private corporations. Had they not had shareholders and highly compensated managers, they would not have taken as many risks as they did because they would not have had the same profit opportunities.

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