Tuesday, September 30, 2008

Thomas Sowell On The Current Financial Crisis

As always, economist Thomas Sowell puts the current situation into perspective - here are some key points from his most recent column "Bailout Politics":

1. Nothing could more painfully demonstrate what is wrong with Congress than the current financial crisis. Among the Congressional "leaders" invited to the White House to devise a bailout "solution" are the very people who have for years created the risks that have now come home to roost.

2. The idea that politicians can assess risks better than people who have spent their whole careers assessing risks should have been so obviously absurd that no one would take it seriously. But the magic words "affordable housing" and the ugly word "redlining" led to politicians directing where loans and investments should go, with such things as the Community Reinvestment Act and various other coercions and threats.

3. If Fannie Mae and Freddie Mac were free market institutions they could not have gotten away with their risky financial practices because no one would have bought their securities without the implicit assumption that the politicians would bail them out. It would be better if no such government-supported enterprises had been created in the first place and mortgages were in fact left to the free market. This bailout creates the expectation of future bailouts.

3 Comments:

At 9/30/2008 7:33 AM, Blogger Arman said...

"It would be better if no such government-supported enterprises had been created"
So true. Government and business don't mix. The only really big business back at independence was church, and we know what the fathers thought of government dealings with those enterprises.

 
At 9/30/2008 11:35 PM, Anonymous kris said...

Absolute and pure truth.

 
At 10/01/2008 11:25 AM, Blogger Arman said...

No.
There is A truth in this spiel that I acknowledged. The rest of it is fluff and filler. Notice that although Sowell waxes eloquent on condemnation, he gives no comprehension on what needs done now.
Absolute? no
Pure? no

 

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