New Library Topic: 2008 Recession
Hard to fathom but it has been over two years since the economy fell into a deep recession due to a crisis in the financial sector. Our newest library topic, 2008 Recession, takes a long, hard, and very comprehensive look at what led to the crisis, and what has been and is to be done about it.
To be sure, there is much blame to go around: Congress subsidizing home buying as the "American Dream" through tax advantages and implicit loan guarantees, thereby driving up home prices; consumers taking out loans they could not really afford; mortgage brokers and lenders lowering underwriting standards; Wall Street firms developing complex investment vehicles without properly assessing the risk of default; credit agencies rubber-stamping the safety of these instruments ... the list goes on.
Of course most of the finger-pointing is directed against private players: the supposedly unregulated but "too big to fail" financial firms, the deceptive brokers, the fraudulent appraisers, the "predatory" lenders--all acting from that ugly motive called greed.
But were those politicians who kept pushing for expanding homeownership not greedy as well--greedy for votes and power? And wasn't it their consequent manipulation of investment risks and rewards that allowed market checks to be disabled? When the market is not operating freely, claims about market failure are misguided at best, facetious at worst.
Understandably our well-meaning public servants don't see it this way. Politicians are eager at work creating new laws and regulations with unforeseen and unintended consequences. As Rahm Emanuel, President Barack Obama's Chief of Staff quibbed with astonishing frankness: "You never want a serious crisis to go to waste."
Think about the lines you hear trotted out in the media: "We have to get the economy going again, encourage lending." Really? Wasn't too much lending our problem to begin with? That's like telling an obese person not to cut back on his 5000 calorie a day gorging. "We have to prevent future crises." Assuming that is even possible, should we entrust that job to those who got us into this mess in the first place? If my mechanic screws up my car, I might take it back to him to fix because he will do it for free. Politicians charge you for both the screw up and the fixing.
Let's not fool ourselves into thinking that those who bare the most responsibility for the causes of the financial crisis will pay the most. No, it will be us, our children and grandchildren. The road to recovery is threatening to become a road to serfdom.
To learn more about the 2008 Recession, go here. Special thanks to our intern Keith Cygan who helped create this topic!