Talk Radio News Service: News, Politics, Media

A Zogby poll sponsored by the organization Judicial Watch found that 81.7 percent of Americans believe that political corruption was a major factor that lead up to the current financial crises. According to Thomas Fitton, Judicial Watch’s President, the evidence suggests those 81.7 percent are correct.

“American’s seem to get what the problem is, but because ‘everyone’ is involved, you wont hear a peep about it from the city’s establishment,” said Fitton, speaking at a Judicial Watch panel discussion on the causes of the financial crisis.

“Arguably, the financial crisis is part of the biggest government corruption scandal in our nation’s history, and it doesn’t get much bigger than Fannie Mae and Freddie Mac...the companies took care of both political parties.”

Editor of the Real Clear Markets website John Tamny said that deregulation was not the cause of the crisis, as some democratic leaders are suggesting.

“If you look at the biggest freeze so far in this mortgage meltdown, it’s been of Fannie Mae and Freddie Mac If we ignore first of all the fact that both parties to varying degrees were literally horizontal in bed with these guys, the idea that they didn’t have oversight of their activities is laughable,” said Tamny.

Instead, Tamny attributes the origin of the crisis to the weak dollar.

“Real estate is very commodity like, and just how commodities always do well when the dollar is weak, so does real estate. And with housing making big gains upwards in nominal terms in recent years, Americans logically chased this performance and piled into the housing sector.”

This housing boom resulted in people purchasing risky mortgages under the belief that if they found out they could no longer afford it, they would be able to sell it easily in the empowered real estate market. Eventually, the housing market turned sour, and the housing investments followed.

Senior Fellow at the Cato Institute Alan Reynolds found blaming the recession that is taking place worldwide on U.S. housing to be a ‘bit of a stretch’, and claimed that a spike in oil prices had a role in the crisis, pointing to nine occurrences when oil prices tripled, only to be followed by periods of recession. Reynolds expressed skepticism to a government solution.

“Recessions happen. If energy prices get too high, they have to come down. If home prices get too high, they need to come down. If homebuilders build too many houses, they have to stop building for a while until they get the inventory down..if the governments really knew how to stop, prevent, alleviate recessions, why do we still have recessions?”
John Berlau, Director of the Center for Entrepreneurship said that the initial emphasis the government put on housing in the finance system was not as helpful as originally believed, and instead suggested that they should have focused on getting the poor to save and invest.

Berlau said that Fannie Mae and Freddie Mac were essentially hybrids of government and private industry which had dangerous consequences.

“Fannie and Freddie were kind of the worst of both worlds. They could lobby like the private sector could do, but they were also built by congress and had built in government support where they had a 2 billion dollar line of credit...that made investors think, and it turned out rightly, that if anything happened they would be bailed out by the government.”