Dear friends:
 
Dr. Thomas Sowell is a brilliant black economist and columnist, and one of my favorite writers and commentators.  In his new column below, cutting through political rhetoric and demagoguery, he explains the actual cause of the economic mess we are now in and points the finger at the real culprit -- government.  (Surprise, surprise!). 

(But instead of getting less government, we are about to get much more government.)
 
Enjoy, and be informed.
 
Jim
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Upside Down Economics
 
By Thomas Sowell
 
Thomas Sowell is a senior fellow at the Hoover Institute and author of
Basic Economics: A Citizen's Guide to the Economy.

From television specials to newspaper editorials, the media are pushing the idea that current economic problems were caused by the market and that only the government can rescue us.
 
What was lacking in the housing market, they say, was government regulation of the market's "greed." That makes great moral melodrama, but it turns the facts upside down.
 
It was precisely government intervention which turned a thriving industry into a basket case.
 
An economist specializing in financial markets gave a glimpse of the history of housing markets when he said: "Lending money to American home buyers had been one of the least risky and most profitable businesses a bank could engage in for nearly a century."
 
That was what the market was like before the government intervened. Like many government interventions, it began small and later grew.
 
The Community Reinvestment Act of 1977 directed federal regulatory agencies to "encourage" banks and other lending institutions "to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of such institutions."
 
That sounds pretty innocent and, in fact, it had little effect for more than a decade.
 
However, its premise was that bureaucrats and politicians know where loans should go, better than people who are in the business of making loans.
 
The real potential of that premise became apparent in the 1990s, when the Department of Housing and Urban Development (HUD) imposed a requirement that mortgage lenders demonstrate with hard data that they were meeting their responsibilities under the Community Reinvestment Act.
 
What HUD wanted were numbers showing that mortgage loans were being made to low-income and moderate-income people on a scale that HUD expected, even if this required "innovative or flexible" mortgage eligibility standards.
 
In other words, quotas were imposed -- and if some people didn't meet the standards, then the standards need to be changed.
 
Both HUD and the Department of Justice began bringing lawsuits against mortgage
bankers when a higher percentage of minority applicants than white applicants were turned down for mortgage loans.
 
A substantial majority of both black and white mortgage loan applicants had their loans approved but a statistical difference was enough to get a bank sued.
 
It should also be noted that the same statistical sources from which data on blacks and whites were obtained usually contained data on Asian Americans as well. But those data on Asian Americans were almost never mentioned
 
Whites were turned down for mortgage loans more often than Asian Americans. But saying that would undermine the reasoning on which the whole moral melodrama and political crusades were based.
 
Lawsuits were only part of the pressures put on lenders by government officials. Banks and other lenders are overseen by regulatory agencies and must go to those agencies for approval of many business decisions that other businesses make without needing anyone else's approval.
 
Government regulators refused to approve such decisions when a lender was under investigation for not producing satisfactory statistics on loans to low-income people or minorities.
 
Under growing pressures from both the Clinton administration and later the George W. Bush administration, banks began to lower their lending standards.
 
Mortgage loans with no down payment, no income verification and other "creative" financial arrangements abounded. Although this was done under pressures begun in the name of the poor and minorities, people who were neither could also get these mortgage loans.
 
With mortgage loans widely available to people with questionable prospects of being able to keep up the payments, it was an open invitation to financial disaster.
 
Those who warned of the dangers had their warnings dismissed. Now, apparently, we need more politicians intervening in more industries, if you believe the politicians and the media.

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Correction

Dear friends:

This is a minor correction to my "Arrest and Deport Obama" message the other day.  I said "Linda Panetta is the daughter of Leon Panetta, who was recently named by Barack Obama to be the new CIA director."

Several readers corrected me, saying that Leon is not Linda's father.

My own research reveals that the connection was made in a Springfield College (Massachusetts) bulletin which announced Linda as a speaker.  The below is the announcement.

"ACTIVIST LINDA PANETTA SPEAKS - Linda Panetta, photojournalist, social activist, and daughter of former White House Chief of Staff Leon Panetta, spoke about her work in Central America and the Middle East in a presentation entitled 'Social Justice and Contemporary Society' on Monday, Feb. 12, in Marsh Memorial Chapel. Read more."

I discovered that the college later issued a corrected announcement and omitted the part about Linda Panetta.  Linda has also stated that they may be cousins but not father-daughter.

Unless Leon and Linda are hiding the relationship, my statement about them may not have been true, but it does not alter the essence of my larger message concerning Barack Obama.

Jim