On the occasion of President Barack Obama’s State of the Union address this week, marking five years since he was sworn into office with the stated primary objective of turning around the post-crisis domestic economy, it’s worth asking: Is America safe from another economic crisis?
Despite the regulatory efforts hustled in as a result of public panic and a political class desperate to be seen doing something, the initial problems remain, and the next crisis could be even worse. Among the major problems: risky loans to those who can’t repay them. Liberal advocacy groups such as Association of Community Organizations for Reform Now (ACORN), pushed lenders such as Fannie Mae and Freddie Mac to grant loans to borrowers who couldn’t afford repayment.
The underlying problem still exists, and the new regulations are pure political theater.
“You can’t repeal the laws of supply and demand or prevent financial crisis,” says regulatory expert Donald Lamson, a partner at the law firm Shearman & Sterling. “Thus, you’ll always be tempted to save large institutions to prevent pain on a large scale.” Continue>>>