In May 2009, President Obama created the “Financial Crisis Inquiry Commission” (FCIC) to investigate the causes of the financial crisis of 2007-2009. Basically, the FCIC put the blame for the financial crisis on lax regulation, greed on Wall Street, faulty risk management at banks and other financial firms and on households for taking on too much debt.
The FCIC’s Democratic majority placed the blame for the financial crisis on the private sector and dismissed the idea that government housing policy could have been responsible. The report went so far as to suggest that Fannie Mae and Freddie Mac, and the politicians that oversaw them, were not the cause of the financial crisis.
I strongly disagreed in my May 18, 2010 E-Letter and now a new book on the subject comes to the same conclusions that I did. Now Fannie and Freddie and the politicians responsible are back in the news again.That’s good!
What is not good is the recently reported fact that the government is once again pressuring regional and community banks to make mortgage loans to low income families that can’t afford them. This could be the making of subprime loan crisis #2. You need to know about this, and I will give you the details as we go along.
To round-out today’s letter, I will show how the so-called government “Agency Debt” – that which is supposedly not backed by the full faith and credit of the government – really is guaranteed by the government. Agency Debt has exploded over the last 25-30 years, yet it is not included in our official national debt. You need to know about this as well.