@Foxfyre,
I am sorry I saw that video, it just brings back all kinds of bad feelings and memories. It is sad because there is not much individuals can do given the way Congress is structured and gets bills passed. Earmarks are the classic case where they are added at the very last minutes to important legislation that has been wrangled over and much thought and compromise has gone into them. But in order to pass the legislation members are forced to vote for the whole thing or see it die. It would make an excellent Republican ad though. They could scrape up the money, slow it down, play it in its entirety on national TV, and post it on the internet so people could Google It!
The measure passed by Congress to mandate increased sub-prime lending was a big part of the cause of our current problem and justifies an adversity towards the government constantly trying to pick economic favorites, whether it be subsidies for ethanol, solar, and wind alternative energy sources or those that increase lending to those who are ill prepared to pay their debts. To help find guilty parties investigators into crimes always ask Cui Bono (who benefits)? Here we find that taxpayers, overall, do not benefit from the Democratic social engineering that artificially created the housing bubble/crisis, only the politicians do by using taxpayer money as slush funds to make themselves look good to their constituents. That's why it's important to make government smaller--the less money it gets the more honest we can keep the politicians. George Will once said: wise government should be informed as to what it can and cannot do and, if it can, whether it should. I don't feel an Obama executive and Democratic Congress will constitute such an institution. McCain seems much more likely to tap the breaks on an overzealous congress than does Obama.
Although the social engineering of the congress is the most egregious and preventable of economical ills, the second part of the financial crisis is due to a lack of transparency and just plain greed. As we all know MBS (mortgage Backed Securities) are individual mortgages bundled together to form a security (like a bond) that is required to be purchased and then gives a return. But, the lack of transparency argument only flies so far. Yes, different sub-prime mortgages are packed together but the return on that security is directly proportional to the risk involved. The higher risk (greater possibility of default) of the mortgage the greater the monetary return. There is a price signal that cannot be ignored so initially transparency is not the problem. Transparency enters as these securities are sold and resold to different banks. Compounding this we have greed entering in the equation when large banks use leverage (they borrow money) to buy even more of the products to, hopefully make even more money. Some even went as high as 30 to 1 ratio of leverage (Their down payment on $3000 worth of security was only $100). When those mortgages started to fail (burst housing bubble) not only did they lose their value but they also owed the balance on their leveraged accounts--the $2900. We could also at this point mention government (IRS) banking rules known as "mark to market" which further aggravates the problem, but I think the point is made. All this was started and aggravated by Congress pushing more and more money (taxpayer money) into the housing market. We have recently seen the same thing in the ethanol/corn/meat relationship.
Pricing of assets and products is important. Economists tell us that correct pricing prevents the misallocation of assets. This means we put our money where we get the most return and return is not always defined, immediately, as dollars. The price also reflects value, both market and personal. Government incursion into markets always distorts prices and sometime moral values. Take public housing. Why doesn't this seem to work in the long term? Why do these units unfailingly descend into public hell-holes? Why do the residents thereof treat their own homes as if they have no value? You only have to ask how much they paid for them to get your answer. But is this all these people's fault? I think government has for generations made those at this income level economic slaves, literally. There are special interests that are a force to be reckoned with within our government that benefit by keeping these poor people out of the job market. Bill Cosby sees what this is doing to these people, and sees moral degradation. He's right and Jessie Jackson is wrong.
Finally, we are a debt society. Our government has played a large part in making this so. Tax laws and government programs favor debt and punish saving. Work hard and put your money in a savings account the government has its hand out. Try to invest in the economy by buying stocks and getting a return on your investment (Dividends) its hand is out. Sell those stocks at a profit it has its hand out. Used to be (pre-Reagan) you could deduct all interest charges, a form of tax subsidy. The Fed has kept interest rates very low and it has been argued this has contributed to the housing bubble. The cost of college education has soared to over 7 times that of inflation mostly because of government programs that not only inject more money into the market (but not more colleges) but actually give bigger loans to those with more debt. If you make a decent living, save all your life, paid off your own home, have some money in the bank, own your own car and paid your taxes, you are able to get a college loan of... nada. But if your income is decent, take out a large mortgage on a big house, and max out all your credit, your government college loan is increased. (If you really have money you can do the latter and put your kid in an apartment at school -- not the dorm, his own apartment. This allows him to have the appearance of living on his own which increases the loan amount which now pays for not only the schooling but the apartment itself which allows...)
Smaller government and some regulation and no regulation that mandates that private industry not perform due diligence in the course of its business.
JM
