Krugman on Mortgage 'Ponzi Scheme'
In today's New York Times, the Nobel laureate and recent White House guest begs the question: Why didn't somebody say something to warn the world of the financial crisis to come? Answer: Life is junior high.
... [N]obody likes a party pooper. While the housing bubble was still inflating, lenders were making lots of money issuing mortgages to anyone who walked in the door; investment banks were making even more money repackaging those mortgages into shiny new securities; and money managers who booked big paper profits by buying those securities with borrowed funds looked like geniuses, and were paid accordingly. Who wanted to hear from dismal economists warning that the whole thing was, in effect, a giant Ponzi scheme?
There were lots of people who warned. Anyone with even a little knowledge of You-Tube can find videos of US Congress persons swearing at regulators in Senate hearings when the regulators warned of impending collapse. The Democrats who control Congress sure aren't going to investigate themselves. They will continue with the charade that they didn't know things were coming apart. One video even shows Congressman meeks swearing at a regulator who is testifying that things were about to come apart. Meeks insisted that everything was fine except that the regulator was in the hearing saying things were bad simply because the regulator didn't want minorities to own their own homes. This mess lies right at the feet of the Democrats.