Quote of the Day: The “Don’t Say You Weren’t Warned” Edition

Despite the long-term damage to the economy inflicted by the government’s interference in the housing market, the government’s policy of diverting capital to other uses creates a short-term boom in housing. Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out.

Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing.


I hope today’s hearing sheds light on how special privileges granted to GSEs distort the housing market and endanger American taxpayers. Congress should act to remove taxpayer support from the housing GSEs before the bubble bursts and taxpayers are once again forced to bail out investors who were misled by foolish government interference in the market. I therefore hope this committee will soon stand up for American taxpayers and investors by acting on my Free Housing Market Enhancement Act.

Ron Paul in the House Financial Services Committee, September 10, 2003

Hat Tip: Classical Revolution

  • TerryP

    The question should be asked of the candidates to where they were in backing the measure proposed by Ron Paul. He had the foresight back them to see the problem and tried to do something about it. Where was teh other candidates leadership? Ron Paul also had the foresight to question Greesnpan on his policies. It seems everyone else in Congress didn’t question a thing the fed did. It seems like we have the wrong choice for President this year. To bad when we could really use someone who saw this coming a long time ago and might have an understanding of how to get out of it.

  • http://doublethinkblog.blogspot.com Jono

    Each month that passes, I am getting more and more bitter and cynical about politicians.

    They caused the mess, and they are going to exacerbate the problem with more regulations.

    Most people have a bit of pride, but will eventually admit they don’t know everything about economics. By listening to other people, they can inform themselves and adjust their views accordingly.

    I have yet to see other politicians shift their views towards supporting the free market, even during the biggest socialist disaster since the New Deal.

    They are the most arrogant, close minded and pig-headed swine. We need an army of Ron Pauls.

  • http://pith-n-vinegar.blogspot.com/ Quincy

    This economic crisis is so clearly a failure of government intervention. Seriously, what was the mission of the Fannie Mac group of GSEs? Expand the availability of credit to new populations. Why couldn’t these populations get credit? They were too risky! Fannie Mae, Freddie Mac, and their sister companies had one mission: Encourage and back bad loans. That’s it.

    Of course, the media and politicians are spinning this thing as a “market failure”. Unrestrained capitalism, they say, caused this. So, once again, we stand on the abyss of government intervention in the economy being used in an attempt to fix government intervention in the economy.

    This time, though, they look like they’ve got better odds of getting it right. One of the good things about Paulson’s original proposal is that it realizes the actual problem and was narrowly tailored to fix it. All it does is get that bad GSE-induced loan paper off the books of private companies. Expensive, yes, but it’s like kidney dialysis for the financial system.

    Now, the Congress is about to blow the lid off it by demanding more money for a bunch of government programs totally unrelated to the mission of undoing the damage caused by the GSEs. Every dollar that the nation borrows and spends on this that’s unrelated to getting the toxic loans off the books will cause nothing but damage. Of course, our politicians are too stupid to realize that the value of the dollar is tied to the number of dollars in circulation.

    Well, I guess we’re screwed.