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What is the root cause of the financial crisis?

By Jack Ward

The mortgage meltdown has disrupted financial markets throughout the world. As we assess our own financial condition we ask, what is the root cause of the financial crisis?

Speaker of the House Nancy Pelosi said, "This came out of nowhere, this is all about the Republicans. We [Democrats] had nothing to do with this." This is a fallacious statement and she knows it.

Many financial gurus point to the Carter era Community Reinvestment Act (CRA) that established the notion that government had a responsibility to provide home loans to unqualified buyers. This faulty notion was expanded during the Clinton Administration and as a result thousands of unqualified people were playing the role of home owners. These toxic loans caused the failure of Freddie Mac and Fannie Mae and the subsequent failure of numerous other banks. But the CRA was not the root cause of the financial failure.

To find the root cause we need to go back to our high school civics class. When I took civics in high school we studied the U.S. Constitution and learned the limited power of the federal government. Our founders knew that if left unchecked eventually government would replace private endeavors to the detriment of liberty and economic growth. Our Founders envisioned a government of strictly limited powers. These powers are clearly specified in Article I, Section 8 of the Constitution.

Nowhere in the U.S. Constitution does it state that the U.S. Government has a responsibility to provide homes for anyone. But you wouldn't know it from the legislation proposed, passed, and signed into law. But we can't place all the blame on the politicians. After all the most asked question a politician hears is - "What can you do for me?" This attitude from the public has corrupted our politicians. Politicians are programmed to please. When have you ever heard a politician tell a voter that a request is outside the scope and responsibility of the government? So if politicians think the public wants something, even if it isn't the government's responsibility, the politicians will disregard their oath of office to get votes.

A Pew Center study found that a large majority of people felt that things ... "run by government are usually inefficient and wasteful, and that Washington's presence in our daily lives is too large." That coincided with what Democrat pollster Stanley Greenberg said, "…the message that government in general is incompetent." H.L. Mencken went even further when he wrote, "All government, in its essence, is organized exploitation…" So it is evident that the public knows that the government is too large, too inefficient, and too wasteful yet they keep asking for politicians to 'do more for me'.

Just as our founders feared, the federal government grew, encroached in the private housing market, and has jeopardized our economy. I have yet to hear any of the politicians that lowered the lending requirements that caused this mortgage meltdown acknowledge any responsibility. Total denial of any responsibility is the mantra of the politicians.