NCPA - National Center for Policy Analysis

Looming Fallout

October 26, 2015

Here's the latest story line: bailouts, trillions of dollars of government spending and debt, easy money and re-regulation of Wall Street ended the 2008 Great Recession. Actually, says Stephen Moore, this is what created the crisis. The myth took on new life last week when Ben Bernanke took a bow in the Wall Street Journal for, in his mind, saving the economy with his $3 trillion of quantitative easing and zero interest rate policy.

Now the Fed, the White House and Congress are recreating the very same conditions for another financial bubble. If it pops, we could replay the same devastating effects as occurred during the first bubble in 1999 and 2000. It is doing so in four ways:

  • Dodd-Frank regulations are exacerbating one of the greatest consolidations of the banking industry since the Great Depression. 
  • Fannie Mae and Freddie Mac are engaged in the same low down payment lending mania of 2004-07, and the Obama administration is on a Bush-like homeownership push. 
  • The Fed refused to tighten its stance in September.
  • Government is hopelessly over-leveraged, and the interest rate exposure is enormous.

All of the conditions of financial wreckage are reappearing. The presidential candidates should start warning voters that Washington is rebuilding another financial house of cards.

If they don't, when the financial crash comes and Americans see their life savings disappear, the media and the history books will again blame conservatives for the destruction from the rampant financial negligence of government.

Source: Stephen Moore, "Washington Sets the Stage for Another Financial Crisis," Daily Signal, October 16, 2015.


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