What Really Caused the 2008 Financial Crisis, Part One (Re-Air)

So, what really caused the 2008 crisis: the failure of capitalism, socialism, too much regulation, too little regulation, Wall Street greed, fraud, corruption, cronyism, stupidity? Or all of the above?

Guest, Representative Jeb Hensarling comments,

“We suffered from dumb regulations and regulators, and Fannie Mae and Freddie Mac who practiced capitalism on the way up and socialism on the way down. All with the faith and backing and credit of the U.S. taxpayer. We had a whole set of policies that incented, cajoled, mandated, suggested, financial institutions loan money to people to buy homes they could not afford to keep.

We cannot intellectually make a case that there was any lack of regulatory authority to have prevented a crisis”.

Some 9 years after the financial crisis, the jury is still out on the causes of the crisis. As a result of previous financial debacles we asked for and got more regulations such as the Dodd Frank Act, which caused a slow recovery and actually suppressed financial activity.

Our experts agree that continuing to talk about the issues and causes are important to prevent a future crisis. Yet, without major changes in our systems, regulations and government policies we’ll continue to repeat the same mistakes.

Left to Right: Peter J. Wallison, George A. Selgin, PhD

Joining host, Dennis McCuistion, are:

• Peter J. Wallison: Arthur F. Burns Fellow, Financial Policy Studies, American Enterprise Institute, member of the Financial Crisis Inquiry Commission and author of, Hidden in Plain Sight
• George. A. Selgin, Ph.D: Director of the Cato Institute’s Center for Monetary and Financial Alternatives; Professor Emeritus of Economics at the University of Georgia,
• and by prior taped interview, Representative Jeb Hensarling: (R TX) Chairman of the House Financial Services Committee.

Our experts talk about the subprime mortgage situation and how Fannie and Freddie were huge contributors in encouraging affordable housing by allowing 3% and 0% down for down payments. However, many, in fact a majority of mortgages on Fannie and Freddie’s books were weak and subprime.

Dennis with Audience Members

The Federal Reserve comes in for its share of responsibility or lack thereof. The Fed’s job, to assure the problem did not turn into a deeper issue, yet it botched that and taxpayers paid for it.

In September of 1999, Peter Wallison said, “If they [Fannie and Freddie] fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.” Prescient?

In 2002, Congressman Barney Frank said, “I do not regard Fannie and Freddie as problems. I regard them as assets.” After the Freddie Mac accounting scandal, the Congressman then said, “I do not think we are facing any kind of crisis.”

As long as we continue and government continues to deny responsibility or fails to examine cause, these issues will persist.

Join us as we talk about things that matter… with people who care. And please don’t forget that for the last 28 years it is you, our viewer, who keeps us on the air.

The McCuistion Program, a 501(c)(3) tax exempt organization does not receive any KERA pledge dollars, PBS funds or government grants, so thank you for your continued support. And special thanks to the Hatton B. Sutton Foundation.

Thanks for joining us,

Niki McCuistion
Co-Founder, Executive Producer, Producer
Business Consultant / Executive Coach, specializing in Organizational Culture Change, Governance and Strategic Planning
(214) 394-6794
www.nikimccuistion.com
nikin@nikimccuistion.com