The housing boom and bust

Sowell (economist, Hoover Institution) refutes the proposition that the housing bust and recession of 2007-09 were caused by insufficient governmental regulation of the real estate and financial industries. With numerous citations and quotes, Sowell makes a strong case that government intervention created the housing bust, as laws and threats of legal action pushed banks into making risky loans. The origins of the housing bubble are traced to the 1970s, when restrictions on development made land values rise rapidly in some areas, while laws such as the Community Reinvestment Act coerced banks to provide mortgages to low-income borrowers. Sowell argues that the antidiscrimination rationale that promoted home ownership for minorities is faulty. He also criticizes the expansion of government action by the Roosevelt and Obama administrations. However, he ignores the role that government plays by subsidizing land values by providing public goods that are paid for by taxes that do not fall on land. For that, see Fred Harrison's Boom Bust: House Prices, Banking and the Depression of 2010 (1999). Summing Up: Recommended. All readership levels. F. E. Foldvary Santa Clara University