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Those who fail to learn how they created the bubble are destined to reproduce it

 

Those who fail to learn how they created the bubble are destined to reproduce it

 

I believe that the prolonged artificially low interest used to try to re-inflate the economy after the .com crash is the main cause of the housing bubble and that if it had not been housing it eventually would have been something else.  However, did find a couple of interesting point in Barney Franks opening remarks in this 2003 hearing regarding the regulation of Fanny and Freddie.

1) Mr. Franks’ admirable goal is to make housing affordable and many on both side of the isle were cheering at high home ownership in 2004, yet affordable is the exact inverse of what they accomplished while they were being "successful"

2) Mr. Franks was very eager to point out that they are using Fanny and Freddie to accomplish things the market will not do.  Thus the free market should not be considered either responsible for the "success" in 2004 nor the pain felt due to the realization that it was false in 2007. 

I personally like Mr Franks and have no interest in attacking him.  But, since few have learned anything from history and instead only listen to the "we need more regulation" drum beat I thought I point out a bit of history so that we might learn how to not repeat it.

Sorry for the caps, I just copy pasted:

7:37 – I WANT TO INCREASE THE LEVERAGE WE HAVE  FANNIE MAE AND FREDDIE MAC DO VERY GOOD WORK, AND THEY ARE NOT ENDANGERING THE FISCAL HEALTH OF THIS COUNTRY, BUT THEY DO DERIVE BENEFITS FROM THE CURRENT SET OF LEGAL ARRANGEMENTS.

7:49 – BUT ALSO PARTICULAR USE OF THE GREAT RESOURCES THEY HAVE THE PROFITS THEY MAKE TO HELP US WITH AFFORDABLE HOUSING, WHICH THE MARKET IN AND OF ITSELF WILL NOT DO

You can listen to Mr. Franks yourself: http://www.c-spanvideo.org/appearance/480702524  I’ve not reviewed it all myself.  I bet this is much more to be learned.  Please share anything you find. 


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