Our Damaged Economy
In the past 10 years, the U.S. economy has suffered one disaster after another, all of which were predictable and many of which were avoidable. In the 1990s it would have been inconceivable to think the following would have occurred by the end of 2011:
- That the government, in the name of “affordable housing,” would use Fannie Mae and Freddie Mac to force banks to lend to a wider pool of people, thus creating a giant credit bubble.
- That the credit bubble would in turn inflate housing prices to unsustainable levels, which in turn set up the housing collapse.
- That the housing collapse would be so massive that it would wipe out a third of the average net worth of every American household, with the value of the housing stock falling on average by 33 percent from its peak,2 and with roughly 29 percent of homes with mortgages upside down3 (where the balance owed exceeds the value of the home).
- That the collapse of housing prices would end housing's role as a store of value.
- That families would move in with each other out of economic necessity, ending 200 years of household dispersion and threatening 20 million houses (and their associated mortgages) with abandonment.4
- That there would be a record 12 percent of all mortgages in default or in foreclosure in 2009,5 representing over 5,400,000 homes.6
- That Fannie Mae and Freddie Mac—notwithstanding their role in all of the above—would be the only financial entities to escape significant reform in the comprehensive Dodd-Frank ...