Fannie Mae Eases Credit To Aid Mortgage Lending

I believe it is failed social experiments like these that have contributed to our current economic situation.  It does not make good sense to loan out money to someone who cannot prove that they have the wherewithal to repay the loan.  For every loan I have ever applied for, I have to show up with a suitcase full of documentation to prove that I am who I say I am and have the means to make a monthly note.    

@countrygirl411 - 

I concur. Ultimately, I think the root problem lies with the Federal Reserve, but there's been plenty of other actions that have served as catalysts. Although we're hearing about the "evils of deregulation" so much today, I don't see a lack of regulation being the problem. If any regulation was needed, it was to correct for the artificial distortions in the market created by the Fed and our government. It's like they narrowed their focus to one specific group and ignored the possible consequences for the country as a whole. And of course, this happens time and time again.

Sure, some blame does go to lenders and borrowers who made poor decisions. But typically, these things happen. If it was just about greed, then it doesn't make since why all these bad decisions all happened at once. Plus, even if a lender is greedy, they still want their money, and they sure as heck won't give it to somebody who they don't think will be able to pay. Unless, of course, the government changes that. Or if they know the government will bail them out if they screw up.

@breephoenixkhan - 

I'm certainly not intending to put blame the entire deficit (or any of our current financial problems) on this proposal alone. I even said before I posted the article that I believed the Federal Reserve was the primary culprit. If you read my previous blog, you'll find Ron Paul's response to the president regarding the bailout plan. I think he hit on a lot of the major points there. However, there are still many other factors as well, including a corporate tax code that encourages debt-financed investments but discourages equity-financed investments, the Community Reinvestment Act, a hoard of safety nets for a fractional reserve banking system that encourage banks to make bad decisions that they normally wouldn't have, etc.

While I'm certainly no fan of Bush, I'm reluctant about saying things like, "It's been in the shitter since the Bush administration took over Clinton.", as if all of our problems came about just because of Bush and everything would have been peachy with Clinton (maybe you didn't mean anything like that, so I hope I'm not putting words in your mouth). Sure, the massive spending and deficits didn't help anything, and most likely contributed to our current problems. However, when Bush took over, the economy was already going south; the faltering economy was an issue during the 2000 campaign. If Clinton had spent 9 more months to a year in office, his glorious economic record would have been mostly wiped out. The surplus was going to disappear anyway-- the inevitable recession guaranteed that. Along with that, unemployment was going to rise anyway, poverty rates were going to increase, and our GDP was going to shrink. Not only were things turning around before Bush even stepped into office, but there's no way he had the time to affect all of this things in his first few months in office.

Clinton got lucky and the timing was just amazing for him. He happened to go into office at the bottom of an economic swing, and leave at the top of the next bubble right before it burst. His credentials aren't just telling of his economic leadership, but also of pure dumb luck (although, there certainly were some positives of his administration and the government in general during the late 90's, so I'm not going to attribute everything to dumb luck). If Bush would have started in late 2001/early 2002 instead, and left office in the middle of 2007, his economic record would have been marvelous (at least from a superficial glance, like most people asses Clinton), and his successor would have looked like a disaster.

@breephoenixkhan - 

Also, I never really railed on a lack of regulation either. Any regulation we did need was due to the government and Fed's interference and distortions of the markets.