It's hard to think of an area where government involvement has created the problem, then exacerbated it and then acted to prevent it from being solved. But the real estate bubble comes immediately to mind.
Government policy has for a long time been aimed at getting too many people to own homes. Program after program has encouraged home ownership. The Fed pushed it by keeping interest rates too low; Fannie and Freddie enabled it with easy money, egged on by elected officials who had a political agenda; and regulators continually relaxed lending standards to the point at which standards really didn't exist.
Not surprisingly, the result was a huge bubble in prices. So is government now helping get prices down to normal levels? Just the opposite. Program after program is trotted out to keep prices high. That includes various mortgage relief efforts that are doomed from the outset, because they're contrary to getting prices down to where the market deems them affordable.
And now the state attorneys general jump in, seeing a political advantage in doing so. Where foreclosures need to happen, delaying them doesn't help. Do the state AGs really believe that holding off a foreclosure for a month or so is somehow miraculously going to enable home owners to start paying again?
And so the politicians - having created the problem in the first place - go merrily on making the problem worse instead of getting out of the way and letting artificiality return to reality. Is it any wonder that so many people have lost faith in politicians' ability to do anything sensible?
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