Monday, May 31, 2010

A Tale of Two Cities: Memphis, Tennessee

Michael Powell's article in today's New York Times is a painful snapshot of what happens when government tries to "do the right thing." This article chronicles the plight of black residents of Memphis who, like black American across the US, were lured into an over-priced housing market and then crushed by foreclosures. It was deliberate government policy that pushed many low income Americans into housing that they could not afford. We have Chris Dodd, Barney Franks, Bill Clinton, and George Bush to thank for much of this. These politicians and others, under the delusion that everyone in America needed to be a homeowner, encouraged and, in some cases, insisted that, Fannie and Freddie be used as vehicles to push the poor into expanded home ownership. What did they care if a future recession would bring this entire house of cards crashing down? This was the Memphis housing boom -- the first city -- spurred on by deliberate government policy.

So, the inevitable happened. Now, with the administration openly attacking mortgage lenders, the mortgage lenders are fighting back -- with foreclosures. Who gets caught in the middle -- the low income Americans fighting to make their way into the middle class? As the article by Powell points out, decades of economic gains were squandered by these misguided government policies -- policies which remain in place and are unaffected by FinReg. This is the second city of Memphis -- the recession-plagued Memphis that inept government policies have plunged into economic darkness.

When will we learn that government cannot create prosperity? Only individual Americans working and saving can create real prosperity. But, that requires government to get out of the way. It's a shame that the Memphis black community has to be a poster child for government's failures.