Thomas Sowell

By 2007, his line was now that "the subprime crisis demonstrates the serious negative economic and social consequences that result from too little regulation." By 2008, his line was that the financial crisis was caused by "bad decisions that were made by people in the private sector."

When television financial reporter Maria Bartiromo reminded Congressman Frank of his statements in earlier years, he simply denied making the statements she quoted and blamed "right-wing Republicans who took the position that regulation was always bad."

Regulation is of course not always bad, and it would be hard to find anyone of any party who says that it is. Moreover, Congressman Frank had some Republican collaborators in pushing regulators to push banks into risky mortgage lending.

As for the market, financial market specialist Mark Zandi put it very plainly: "Lending money to American homebuyers had been one of the least risky and most profitable businesses a bank could engage in for nearly a century."

What changed that was not the market but politicians like Barney Frank and his Senate counterpart Christopher Dodd, pushing the "affordable housing" crusade through government intervention, in disregard of the risks that they were repeatedly warned about by people inside and outside of government.

Although this is the biggest housing disaster the government has ever produced, it is by no means the first. Republicans intervened in the housing markets to promote more home ownership in the 1920s, Democrats in the 1930s and both parties after World War II. All of these interventions led to massive foreclosures.

Don't politicians ever learn? Why should they? What they have learned all too well is how easy it is to get credit for promoting home ownership and how easy it is to escape blame for the later foreclosures and other economic disasters that follow.


Thomas Sowell

Thomas Sowell is a senior fellow at the Hoover Institute and author of The Housing Boom and Bust.

Creators Syndicate