By Paul Krugman, New York Times
As we look for ways to prevent future financial crises, many questions should be asked. Here’s one you may not have heard: What’s the matter with Georgia?
I’m not sure how many people know that Georgia leads the nation in bank failures, accounting for 37 of the 206 banks seized by the Federal Deposit Insurance Corporation since the beginning of 2008. These bank failures are a symptom of deeper problems: arguably, no other state has suffered as badly from banks gone wild.
Image: foreclosurelistings.com
Where shall we start?
I see no mention of the Federal Reserve’s giant injections of easy money into the banks to encourage them to make lots of loans. Plus generous guarantees that bad loans will be covered by the government. Wink wink nod nod. In fact, many loans gone bad today will be covered by the gove... I mean you the taxpayer. Of course Krugman steers clear of that.
Banks gone wild... hot money from investors. Again, large infusions of cash from the Federal Reserve with lots more encouragement from Democrats who demanded that banks lend to people who normally wouldn’t qualify for a used car loan let alone a mortgage.
And let’s not talk about those poor people who received those predatory mortgages. You know, those who purchased McMansions at 100% loan to value ratio. No money down, no money in the bank, 2 brand new SUV’s, maxed out credit cards - but they did get their mortgage.
Blame the banks and blame those that took out those mortgages. Honestly, they didn’t know what they were doing? Get real. The banks saw endless government money to back their loans. The borrowers in their greed bought bigger and more expensive homes - homes they clearly should have known they couldn’t afford.
What America really needs is an end to economics as practiced by Krugman and the rest of his Keynesian associates.