Saturday, February 7, 2009

Two Chimps and a Balloon...


Chimp one watched as chimp two carelessly inflates the balloon, yet somehow he will be shocked when it bursts...no pictures better summarizes how most politicians and most of the public watched as we created an unsustainable bubble in the housing market and yet somehow were surprised when it burst.

The Fed kept interest rates below inflation, which created incentives for banks to carelessly issue loans and the public to carelessly accept them.

Fannie Mae and Freddie Mac bought billions in sup-prime loans encouraging banks to issue even more of them.

Clinton and Bush stated that they were actively seeking to increase home ownership in "under-represented communities" and Janet Reno went as far as saying that she would actively prosecute banks that did not comply with their initiative, further fuelling the volume of sub-prime mortgages.

Of course many individuals, banks and brokers foolish behavior fuelled the bubble, but they were certainly encouraged by government created incentives.

1 comment:

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