Social Engineering is the Devil in the Detail of Collapse of Wall Street

I’m republishing the following post that was written almost three years ago for the readers of this blog.

By Con George-Kotzabasis

This is the time for all the intellectual Lilliputians to raise their head. Before our two authors send to the gallows Milton Friedman and Frederick Hayek, they ought to be reminded of some facts. The dragon teeth that mauled the only system, i.e., capitalism that brought relative prosperity to the peoples of the world were spawned by government intervention in the first place. Roosevelt’s creation of the publicly funded Fannie Mae, and many years after its twin Freddie Mac, followed by the Community Reinvestment Act, under Jimmy Carter, and which was resurrected by Bill Clinton, were all the offspring of government intervention. They were the putty in the frame of social engineering by which all Americans would have realized their dream, to have and own their own homes.

Clinton’s decision in 1999 put pressure on lenders to “widen the pool of home borrowers.” New York Times article on September 1999 stated: “In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae corporation is easing the credit requirements on loans…encourage banks to extend home mortgages to individuals whose credit is generally not good…Fannie Mae officials say they hope to make it a nationwide program by next spring.” (The Australian, October 20, 2008) Latinos and African Americans are the biggest minorities and the more numerous mortgage defaulters in the US housing market. Fannie and Freddie were providing the easy loans and the …Reinvestment Act were enforcing bankers to render their credit services to all and sundry irrespective of the financial position of the borrowers. (Barack Obama as community organizer was the ‘Enforcer’ as he was threatening banks with prosecution if they did not take riskier lending practices with non-credit worthy customers.) And the whole saga of the sub-prime loans was resting on these rotten foundations created by Democratic administrations. The profligacy of ‘ghetto’ loans in astronomical digits was replacing Gekko greed.

Hence Wall Street collapsed through the derivatives market multiplier leveraging founded on the subprime loans by which the moguls of finance made for a while their ephemeral profits. And this collapse released the nightmare that was always embedded in the dream of mass home ownership when it became evident that many ordinary Americans were not only going to lose their homes but also their jobs all by the grace of government intervention and its blessing of easy loans. Easy come easy go.

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