Sowell is clear and succinct as always. He writes:
Nothing could more painfully demonstrate what is wrong with Congress than the current financial crisis.
Among the congressional “leaders” invited to the White House to devise a bailout “solution” are the very people who have for years created the risks that have come home to roost. …
The idea that politicians can assess risks better than people who’ve spent their whole careers doing so is so obviously absurd that no one should take it seriously.
But the magic words “affordable housing” and the ugly word “redlining” led to politicians directing where loans and investments should go, with such things as the Community Reinvestment Act and various other coercions and threats.
The roots of this problem go back many years, but since the crisis happened on George W. Bush’s watch, that’s enough for those who think in terms of talking points, without wanting to be confused by the facts.
In reality, President Bush tried unsuccessfully, years ago, to get Congress to create some regulatory agency to oversee Fannie Mae and Freddie Mac. …
Since risky investments usually pay more than safer investments, the incentive is for a government-supported enterprise to take bigger risks, since they get more profit if the risks pay off and the taxpayers get stuck with the losses if not. …Fannie Mae and Freddie Mac do not deserve to be bailed out, but neither do workers, families and businesses deserve to be put through the economic wringer by a collapse of credit markets, such as occurred during the Great Depression of the 1930s.
Neither do the voters deserve to be deceived on the eve of an election by the idea this is a failure of free markets that should be replaced by political micro-managing.
If Fannie Mae and Freddie Mac were free market institutions, they could not have gotten away with their risky financial practices because no one would have bought their securities without the implicit assumption that the politicians would bail them out. …
It’s not a long piece, well worth reading and it’s here.