The story of the housing meltdown from an economist

Nobody caught on--not Greenspan, Bush, or Frank. And Barney Frank is still pushing more home ownership--without standards. But Bush will continue to be blamed because it happened on his watch. Video interview June 29, 2009



Sowell asserts in his book, "The Housing Boom and Bust," that politicians in Washington were trying to solve a problem that didn't exist.

"The problem that didn't exist was a national problem of unaffordable housing," Sowell explained. [And he's quite correct--housing was quite affordable in central Ohio.]

"The housing in particular areas, particularly coastal California and some other areas around the country, were just astronomically high. It was not uncommon for people to have to pay half of their family income just to put a roof over their head. So that was a very serious problem where it existed.

"But it existed in various coastal communities primarily and a couple of other places. Unfortunately, the elites whose strongholds are on the East and West Coasts don't seem to understand that there's a whole country in between, and in most of that country housing was quite affordable by all historical standards.

"So they set out to solve the problem by setting up a federal program to bring down the mortgage requirements, the 20 percent down payment and that sort of thing, and by forcing Fannie Mae and Freddie Mac to buy up those mortgages from the people who no longer had to meet the same requirements.

"The banks had no choice but to go along because the regulators controlled their fate. So the banks would simply sign up people, sell the mortgages to Fannie Mae and Freddie Mac. It now became Fannie Mae and Freddie Mac's problem. And that meant it became the taxpayers' problem." [quotes from Newsmax interview]