Government failure, not market failure, would be a more accurate description of the subprime/credit crisis. There would have been less risk-taking and more market discipline if Congress had not guaranteed Fannie and Freddie debt and had not passed the Community Reinvestment Act, which pressured banks to promote subprime and Alt-A mortgages. Moreover, by holding the Federal funds target rate at 1 percent from July 2003 to June 2004, the Fed fueled the housing boom.
Regulation, not deregulation, was the cause of our current economic woes.
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