GuestC[alomiris]: ... one of the things I think is really interesting is that one of the contributors to the [2008 financial] crisis was mortgage-subsidization policies in the United States.
Russ [Roberts]: Encouragement to home ownership in all kinds of dimensions.
GuestC: But encouraging home ownership precisely in a particular way, by creating subsidies for taking risk in a mortgage market. ....
What's interesting is ... what we see is George H. W. Bush, followed by Bill Clinton, followed by George W. Bush, followed by Barack Obama. And even though you might think of it as people very different ideologically, they actually were part of a continuous thread of very similar kinds of policies from the standpoint of some of the issues that we're talking about. I would add to that, that [?] the unlikely coalition members that sort of sit underneath these bi-partisan agreements.
In the case of the United States we had activist groups allied to bankers that were in the process of creating mega-banks, through the 1990s merger movement [?]. To the point that at Federal Reserve Board hearings about mergers, activists would show up--for example, from ACORN (Association of Community Organizations for Reform Now) and testify on behalf of the Bank of America merging with NationsBank. This is not the usual role that you would imagine an activist group taking vis-a-vis a bank merger.[Bold in the above, by HSIB]
Why is this important to people committed to pooh poohing the role of things like the GSE Act of 1992 or the HUD Best Practices Initiative of 1994? Follow the money;
GuestC: Well, they got everybody who was part of that winning coalition in the game of bank bargains did quite well, thank you. So the total amount of subsidized credit that was contractually agreed as a quid pro quo for those activist groups to show up at the merger hearings, which is an understatement of the amount they actually received, was almost $870 billion over the period 1992-2007. So that's not chump change.Again, our bold, but we thought the amount of the extortion deserved emphasis.