If the Fed had curbed leverage and raised interest rates in the mid 2000s, there would have been less craziness up and down the chain. American households would not have increased their borrowing from 66 percent of GDP in 1997 to 100 percent a decade later. Housing finance companies would not have sold so many mortgages regardless of borrowers’ ability to repay. Fannie Mae and Freddie Mac, the two government-chartered home lenders, would almost certainly not have collapsed into the arms of the government. Banks like Citigroup and broker-dealers like Merrill Lynch would not have gorged so
...more
Maybe, maybe not. I don't think what happened in the mortgage market was quite that simple. This is the first notable example in this book where the author begins to defend investment groups (hedge funds, banks, insurance companies, etc) as being largely blameless in their impact to the overall economy and pointing the finger at the government for making dumb rules that allowed them to do the damage they've done.
