On his radio show today, Dennis Prager talked to economist Tom Sowell, who published a book last year on the housing boom and bust (a revised edition of this book is coming out next month).
Tom: “The banks did not cause the housing crisis. This government caused the housing crisis. They caused it, first of all, by putting in restrictions that drove up the price of housing in special areas. Then seeing these local problems in places like coastal California, they came in with all kinds of national programs which reduced the requirements for getting a mortgage all over the country in the name of affordable housing, and they got lots folks out on a limb who could not pay off the mortgages they took out and the rest followed like dominos.
“The banks certainly did not want to create a situation in which they wouldn’t get paid. It seems so obvious.”
Dennis: Isn’t the history of banks when they are irresponsible, such as the loans to Latin America a couple of decades ago, don’t they know they’ll be bailed out in any event?”
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