Thomas Sowell explains why the collapse of Freddie and Fannie is not a failure of free market economics but rather a predictable consequence of government involving itself in the marketplace. He says, for example, that:
[V]oters [don't] deserve to be deceived on the eve of an election by the notion that this is a failure of free markets that should be replaced by political micro-managing.
If Fannie Mae and Freddie Mac were free market institutions they could not have gotten away with their risky financial practices because no one would have bought their securities without the implicit assumption that the politicians would bail them out.
It would be better if no such government-supported enterprises had been created in the first place and mortgages were in fact left to the free market. This bailout creates the expectation of future bailouts.
Sowell also explains briefly why it's wrongheaded to try to blame this crisis on the Bush administration. It's a good op-ed but the page on which it's found seems to take a while to load. Nevertheless, it's worth the wait.
RLC
