The Practical Philosopher's Blog

Using the practical application of timeless wisdom to address modern issues

Leftist ‘Social Justice’ Caused The Financial Crisis

 Who’s heard the following irrational or emotional exclamations on the current economic downturn?

“This economic crisis is the result of 8 years of failed Bush economic policies!”

“These events are signposts in the historic failure of American and world capitalism.”

“The…financial crisis will give rise to new era of necessary regulation.”

 The problem is these are all wrong. Those making these statements have drawn the wrong conclusions, or more likely, have not educated themselves on the root causes of this economic downturn and are simply regurgitating media sound-bites.

The simplest summary of the current crisis is that it stems from a favorite Leftist ideology of ‘social justice’. Quite simply, the politicians meddled in the free-market and set in motion bad behaviors that are now distorting our current economic markets 10-15 years later. Specifically, the current conditions are called, and objectively are, a mortgage crisis. The Leftist or Socialist view was, and still is, that everyone has a ‘right’ to a house whether they could afford it or not. Little did they know how badly their unwise ideology would end up hurting us later.

During the Clinton administration, all of the safeguards against the mass practice of risky lending were dismantled. They negated the standard practice of financial requirements (necessary income levels and demonstrated credit history) for getting a household mortgage. The government entities Freddie Mac or Fannie Mae were instructed not only to create and/or buy up these bad loans but also insure them with the full credit and guarantee of the US government (read: the Treasury- your tax dollars). This opened the gates for a flood of bad debt into our markets. The best phrase I’ve heard on this was that this created a privatization of the profits, but a socialization of the risk to the taxpayers.

I will be doing a series of posts on this topic to educate people on the real root causes of this current downturn. The main reason for these posts is that this crisis is an example of merely one negative outcome of a whole host of flawed Socialist policies that are currently being contemplating under the new Obama regime.

The article below is a great first primer on the root causes of our current economic conditions:

BB&T CEO John Allison Blames ‘Religious Belief’ in Affordable Housing for Financial Crisis

Despite what the news media keep saying, capitalism and deregulation were not the causes of the financial meltdown.

Instead, BB&T CEO John Allison pointed the finger at government creations like the Securities and Exchange Commission (SEC), Federal Deposit Insurance Corporation (FDIC) and Fannie Mae and Freddie Mac, the two government-sponsored enterprises that failed last year. Allison was giving a lecture in Washington, D.C. Jan. 29 for the Ayn Rand Center for Individual Rights.

Allison cited a “religious belief in affordable housing” that led the government to institute the Community Reinvestment Act of 1977 (CRA) and later, during the Clinton years, to a huge expansion of Fannie and Freddie.

“In my opinion, I’m certain without Freddie Mac and Fannie Mae we could not have had the magnitude of misinvestment – we [would of] had [some] misinvestment, but nothing like what we’ve had today,” Allison said.

Read the rest of this article here:

http://newsbusters.org/blogs/julia-seymour/2009/01/30/bb-t-ceo-john-allison-blames-religious-belief-affordable-housing-fina

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Filed under: Economy, Politics, , , , , , , , , ,

2 Responses

  1. […] banks are ‘guilty’ of doing too many ‘predatory’ loans (even though the Government and Leftist ‘Social Justice’ created this situation) and they paid their execs too much, so they deserved punishment. 2. Now […]

  2. […] blindness that sets the stage for these continuing economic disaster-situations (Liberals driving sub-prime mortgages come to mind). These always occur when the government meddles in and creates artificial distortions […]

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