Walker wrote:I thought this was the causal chain prior to 2008 correct in the U.S.? I’m not a financial wonk, just recalling what I heard.
- Federal Govt. required banks, under threat of penalty, to issue housing loans to just about everyone.
No, governments gave the power to banks to invent money with a computer. They needed no coercison and they were happy to rake in all the fees. This was new money designed to fuel a property boom to "grow the economy".
- Federal Govt. guaranteed the loans.
- Banks jumped on that gravy train.
- Unqualified home buyers were granted loans.
- Housing for all.
- Massive defaults were the result.
- Banks sought their insured reimbursements.
- Instead of a run on the banks, there was a run on the government, by the banks.
Was it a scheme by the banks to suck up money?
Or, was it a socialist dream of housing for all?
That's a right wing dream.
It was not "socialist" in any sense. It was the dream of free enterprise and everyone for himself. A socialist would provide publicly owned housing as a start up for families who could not afford them. The Republicans who presided over this insanity were not socialist in any sense. I truly find that an odd thing to say from this side of the pond.
The last property bubble which burst spectacularly in 1987 and the next one in 2008 were both the result of Neoliberal Economics of Thatcher and Reagan who both wanted to encourage a home owning economy to move away from social housing; continued by Bush and Blair.
In the UK Thatcher sold off all the "council housing" at a knock down price and forbade the local authorities from building anymore. This advantaged the middle class, and created a large population of people at the mercy of landlords. Those who could not get a mortgage were forced out out of social housing and into rented accommodation, often poor quality and high price.
The result of all this free enterprise is millions of empty homes and millions of homeless; at the same time massive tax cuts for the rich. Not what I can socialism.