The Tom Woods Show Ep. 2558 The Regime Lies to You About Recessions
Oct 19, 2024
Keith Knight, managing editor at the Libertarian Institute and author of 'Domestic Imperialism', joins to dive deep into the myths surrounding the 2008 financial crisis. They discuss the misleading government narratives that blame deregulation while shedding light on Fannie Mae and Freddie Mac's risky practices. The conversation includes insights into how low interest rates impact economic cycles and critiques the Glass-Steagall repeal's alleged role in the crisis. Knight also challenges historical misconceptions, particularly about Herbert Hoover and public policy.
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Episode notes
Deregulation and the Crisis
- No deregulation led to the 2008 crisis; institutions could have acted similarly at any time.
- Even Greenspan, who advocated for lower interest rates, later acknowledged the resulting housing price surge.
GSEs and Moral Hazard
- Fannie Mae and Freddie Mac, government-sponsored enterprises, bought risky mortgages from banks, creating moral hazard.
- This implicit bailout guarantee encouraged excessive risk-taking by banks, leading to bad loans and the 2008 crisis.
Fannie Mae Scandal
- In 2004, Fannie Mae executives were caught in accounting scandals to justify bigger bonuses.
- Politicians overlooked this because Fannie and Freddie were seen as promoting homeownership.