TheHill.com - Republican report puts blame for housing on Fannie, Freddie: "“The housing bubble that burst in 2007 and led to a financial crisis can be traced back to the federal government intervention in the U.S. housing market intended to help provide home ownership opportunities for more Americans,” declares the first sentence of the GOP Oversight and Government Reform report.
The report tries to center debate on government involvement, rather than Wall Street."
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It seems to me that it is hard to separate the respective roles of public policy and private profit-taking in creating the collapse of the housing market. However, there is nothing wrong with the GOP trying to remind people that bad policies played a major role, because since the election all we have been hearing from DC is that corporate greed is the root of all our problems. We have a political economy, not a free market economy.
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One of the major contributors to the current political polarization is describing the economy and its regulation in absolute terms, i.e. either free market or highly regulated.
As you imply, there is substantial government involvement in the economy that can be traced back to the Great Depression and New Deal.
The policy question isn't an either/or proposition. I would submit the degree of regulation and government involvement in markets should be linked to the degree of competition that exists. Free markets with many sellers and buyers are in the best position to operate with little regulation since competitive pressures will serve as a natural regulator. However that's not the case in monopolistic or oligopolistic industries where market competition is weak and a greater regulatory oversight is warranted.
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