Create Alert. Launch Research Feed. Share This Paper. Join students from University of Bath. More Information Less Information. Enter the password to open this PDF file:. Cancel OK. File name: -. There were many reasons, including memory and new regulation, why not. But then:. No one can doubt that the American people remain susceptible to the speculative mood—to the conviction that enterprise can be attended by unlimited rewards in which they, individually, were meant to share.
A rising market can still bring the reality of riches. This, in turn, can draw more and more people to participate. The government preventatives and controls are ready. In the hands of a determined government their efficacy cannot be doubted. There are, however, a hundred reasons why a government will determine not to use them. In both cases, the government knew what it should do.
Both times, it declined to do it. In the summer of a few stern words from on high, a rise in the discount rate, a tough investigation into the pyramid schemes of the day, and the house of cards on Wall Street would have tumbled before its fall destroyed the whole economy. In the FBI warned publicly of an epidemic of mortgage fraud. But the government did nothing, and less than nothing, delivering instead low interest rates, deregulation, and clear signals that laws would not be enforced.
This was fuel for fires. The Greenspan Doctrine held that bubbles cannot be prevented, that the governments task is merely to clean up afterward. The Greenspan practice was to create one bubble after another, until finally one came along so vast that it destroyed the system on the way by.
At its source, our crisis is a housing crisis, and not one of too little housing but of too much. It springs from a predatory attack on the safeguards that had for decades kept housing finance safe and stable.
In the early s the Bush administration sent clear signals that regulations on mortgages would not be enforced. The signals were not subtle: on one occasion the director of the Office of Thrift Supervision came to a press conference with copies of the Federal Register and a chain saw. At age 61, after 13 years of uninterrupted unemployment and at least as many years of living on welfare, she got a mortgage.
She got it even though at one time she had 23 people living in the house square feet, one bath and some ramshackle outbuildings. The place has since been condemned. Nonetheless, a local financial institution with the cover-your-wallet name of Integrity Funding LLC gave her a mortgage, valuing the house at about twice what a nearby and comparable property sold for.
This was fraud, perpetrated in the first instance by the government on the population, and by the rich on the poor. The borrowers were, of course, complicit in some cases, taking out mortgages they never had a hope of paying down. In many more, they were simply naive, gullible, open to pressure, credulous, and hopeful—something might turn up.
They took the assurances of lenders that housing prices always rise, that bad loans can always be refinanced. They were attractive to lenders for all of these reasons, and because they had nothing to lose. A borrower with nothing to lose will sign papers that another will not. A government that permits this to happen is complicit in a vast crime.
As in , the architects of disaster will form a rich rogues gallery to go shooting in. The Old Objectivist, Alan Greenspan, was intermittently aware of impending disaster and resolutely unwilling to stop it.
There will be Phil Gramm, of whom in April the Washington Post wrote that he was the sorcerers apprentice of financial instability and disaster. The Post was quoting me. Reached on the phone, Gramm denied it. And Bernard Madoff. The wreckage of bloated reputations is part of the fun of a crash, at least in deep retrospect.
And in the renewed prosperity of the s and later years, my father and history were generally content to leave matters there. Juries in our time, if they get the chance, will be less forgiving. Times Edition Notes , Classifications Dewey Decimal Class May 3, Edited by Achalraj. February 13, Edited by Clean Up Bot. December 13, Reviews User-contributed reviews Add a review and share your thoughts with other readers.