People often forget the lessons that history serves up to us. We are destined to relive the errors of our past. This happens in war, in love and, it seems, it politics.
You would think that with a recession just ending, an economy that won him the election and a financial crisis “the biggest since the Great Depression” Mr. Obama would know not to take these history lessons to heart.
But he isn’t, he’s going right back to the well that put us in this situation to begin with.
WASHINGTON (Reuters) – The Obama administration on Monday launched a program to help the depressed U.S. housing market by effectively allowing state and local housing finance agencies to borrow from the U.S. Treasury.
The initiative, announced as new data showed a downturn in homebuilder sentiment, aims to restart a source of mortgage financing for first-time and low-income buyers that has been largely shut down by credit market gridlock.
Described as temporary by the U.S. Treasury, the Department of Housing and Urban Development and the Federal Housing Finance Agency, the program will allow state and local agencies to issue bonds through government-sponsored mortgage finance giants Fannie Mae and Freddie Mac. Those bonds would then be purchased by the Treasury.
“Through this initiative, the administration aims to help … jump start new lending to borrowers who might not otherwise be served and to better support the financing costs of their current programs,” U.S. Treasury Secretary Timothy Geithner said in a statement.
At the very root cause of this most recent crisis is the fact that it was easy for people to borrow money to buy houses. Many of these people would not have been able to afford to borrow that money in the past. With the added demand on the housing market, the price of homes sky rocketed. This in turn caused further investment in that market and so on and so on. Finally, when those folks who borrowed money they couldn’t afford failed to pay that money back, the wheels came off. The rest, as they will say, is history.
So what are we doing? Ignoring history and doing the exact same thing; borrowing money to people who can’t afford it.