It's Official. Dr. Thomas Sowell explains the housing loan crisis.

Dr. Sowell discussed his new book, The Housing Boom and Bust, with Sean Hannity on Wednesday night.  Regarding the blame for the current economic condition, he said

There’s a lot of blame to go around, but what’s crucial… is that the mortgage payments stopped coming in, and so whoever created a situation where people were given mortgages that they weren’t able to pay, that’s who I would blame, and that would be the regulators.  We keep hearing that all of this came about because there wasn’t enough regulation.  No, it was precisely the regulators who forced the banks to lend to meet government set quotas… and that’s what made the mortgage market so risky.  Now things happened in Wall Street and elsewhere that added to the risk, but… if the money had kept coming in from the mortgage payments, the risk wouldn’t have been there….

Among other things, they [the Clinton Administration and Congress at the time] certainly gave a quota to Fannie Mae and Freddie Mac as to how many loans of a certain kind they had to make.  And that in turn meant that the original lenders, the banks, the mortgage companies, could lend to anybody, no matter how risky it was, sell the mortgages to Fannie Mae and Freddie Mac, and the banks get their money up front, and the problems become Fannie Mae and Freddie Mac’s problem.  Which in turn means it becomes the taxpayers’ problem….

This is a bigger mortgage crisis than we’ve ever faced before; it is not the first.  Republicans pushed the same idea in the twenties, Democrats in the thirties, both of them in the forties and fifties; every time it lead to large foreclosures.

This is generally the same analysis that’s been made by conservatives since the crisis first arose.  It’s nice to know there is a real economist making the case based on data and research, rather than on logic and common sense alone.

This isn’t the result of a failure of the free market system; it’s a result of governmental interference with that system.  By forcing the market down the path of making bad loans, Congress has pushed us into perilous times.