Give Us Liberty by Dick Armey Read Free Book Online Page A

such things as subprime mortgages, okay?” Forstmann says he does not “know when money was ever this inexpensive in the history of this country. But not in modern times, that’s for sure.” In fact, at the peak of the bubble, real interest rates were actually negative.
    THE GREEDY LEADING THE GREEDY
    T HE SECOND HALF OF this tale is the bureaucratic symbiosis between politicians and key players in the home mortgage financing industry, particularly Countrywide Financial and the government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac.
    Politicians aggressively enforced and expanded federal housing policy goals, effectively encouraging financial institutions to give loans to the unqualified. A social agenda of home ownership at any cost helped sustain an unsustainable housing bubble fueled with easy money and credit. After all of the bipartisan moralizing about promoting home ownership and after trillions of dollars of economic losses and personal destruction, actual home ownership quickly returned to its premania level. Indeed, a recent release by the U.S. Census Bureau 7 found that the homeownership rate in 2010 was 67.1 percent—precisely the same rate as 2000. Political agendas aside, markets will eventually clear, leaving a trail of folly behind.
    FreedomWorks and many others had warned Congress for years about the danger its twin monsters Fannie Mae and Freddie Mac were creating. As far back as March 9, 2000, we joined a coalition working “to shine the light of public scrutiny on the nation’s two largest GSEs [government-sponsored enterprises], Fannie Mae and Freddie Mac,” and set out “to educate our grassroots activists to the fact that these government-sponsored enterprises have exposed taxpayers 8 to trillions of dollars worth of risk.” By September 10, 2003, the House Financial Services Committee was forced to call a hearing on the potential danger presented by the GSEs, but nothing came of it. The comments that day by Rep. Barney Frank (D-Mass.) sum up the position of too many: “The more people . . . exaggerate a threat 9 of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see. I think we see entities that are fundamentally sound financially and withstand some of the disastrous scenarios.” Barney Frank, of course, went on to become the chairman of the committee responsible for overseeing the GSEs.
    But we stayed at it and in 2006 named Fannie and Freddie among the Top 10 Welfare Queens in the country, warning, “Remember the S & L banking scandal 10 from the 1980s? If the real estate market tanks today, taxpayers could be on the hook for billions once again. It’s time for Freddie and Fannie to grow up and cut the cord from Uncle Sam’s pocketbook.” By early 2008 Congress was talking about a housing bailout. We responded with a Web site called AngryRenter.com for activists to voice their opposition to letting the housing market sort itself out.
    When the housing bailout bill morphed into the Wall Street bailout, the downside for taxpayers grew. Again, we said let the market work itself out. That’s what markets do. Once the price of something gets to the point where someone wants to buy it, they do—and no sooner. So long as the government tried to artificially keep housing prices up, there would be more houses for sale—more supply—than demand and the market wouldn’t clear. The answer wasn’t more government manipulation of the housing market. It was less.
    The political process should have produced a rational, bold response, starting by unwinding the many government mistakes that created the housing bubble, repealing the various laws and regulations specifically designed to put people into homes that they could not afford and creating a more reasonable approach to how investment firms were monetizing various risks. We could scrap