Russ Roberts, one of my all 'round favorite bloggers of Cafe Hayek fame and professor of economics at George Mason University has a great article in Forbes .

He opens up by showing some well known (or not so well known) and painful political blunders like the perverse effects of ethanol subsidies on corn prices and in turn the agriculture in general over the last few years. He points out anti-gouging ordinances in the South that caused many gas stations to run out of gas leaving customers in need of it scurrying to find any station that had some left in the wake of Hurricane Ike.

Then turning the financial meltdown, he eloquently puts the root of the problem in perspective:

The turmoil in the housing market and the resulting financial crisis is just the latest example of political failure. Politicians wanted more home ownership than the market produces on its own, especially among low-income families. To encourage this politically popular goal, Fannie Mae...and Freddie Mac...were allowed to privatize their profits and socialize their losses. At the same time, Housing and Urban Development (HUD) required them to expand their commitment to affordable housing. Freddie and Fannie achieved this goal by buying bundles of subprime mortgages.

Now taxpayers are on the hook for at least $200 billion, and the dominoes are still falling. The real cost of this failure is that the return to housing was artificially inflated, funneling billions of dollars of capital into housing instead of more productive assets.

Politicians and policy makers ignored the essentially organic nature of market forces and assumed that one piece of the market could be altered while everything else remained unchanged. But politicians always think they can design a market from the top down as long as just the right regulations are put in place.

[sounds familiar ]

And they will tell us that the right regulations can be put into place to patch things up. Color me skeptical.

Moi aussi. ;)

As I've state recently, see here as well, you can't pervert market forces and then blame some murky notion of "markets" for not being able to deal with it and think you've said enough.

He closes the article without much positive to sentiments to how the whole as been handled and is apt to continue to be handled moving forward. Can't say I disagree.

Don Bourdreaux also has an article appearing Forbes on the matter.