My comprehensive ability has been stretched to the breaking point by the awareness that there are still people in this country who hold fast to the belief that the financial crisis, and the sub-prime market that caused it, were not the responsibility of government regulation. It is the height of incredulity to think that an industry as highly regulated as mortgage and finance suffers no effect, good or bad, from government involvement. If one truly believes that federal regulations had no effect on the mortgage industry, then why have them at all? Isn't the whole point of government regulation to have an effect? The over-regulation of the financial industry is exemplary of the law of unintended consequences when Liberal policy aims to use the free market as a tool for social engineering.
I don't know about the rest of the country, but here in Cleveland, Ohio government involvement in the housing market destroyed it. A few years ago the government-subsidized rent program, Section-8, decided to enter the housing market. Section-8 created a program called Shelter Care Plus, whereby low income people could buy newly renovated homes for a fraction of market value, and in a few years they would own them free and clear. The thinking was that once these people owned their own homes, they would no longer need assistance from the Section-8 program and they would magically become contributing members of society.
So Section-8 set about buying distressed properties, or in some cases having tax-lien properties donated to them by the city. They then hired a gaggle of union contractors to completely gut and remodel the homes. These weren't just paint and carpet remodels, but ripping out walls and replacing them with new drywall, re-wiring and re-plumbing the house, installing new kitchen cabinets and bathroom vanities, etc. The houses were, for all intents and purposes, brand new. These homes were then "sold" to low income families for a fraction of market value so as to allow them to pay off the "loan" in just few years.
The problem with the Shelter Care Plus program is that it devalued the housing market in Cleveland so much that legitimate home owners could not sell their properties for what they were actually worth. This unintended consequence, along with the buckets of taxpayer dollars used for the purchase and remodeling of the properties, drained resources better spent elsewhere or simply left in the private sector to grow the local economy. Not only did the Shelter Care Plus program suck up tax dollars and ruin the Cleveland housing market, but the vast majority of intended beneficiaries ended up losing their homes to foreclosure after initiating subsequent loans in an effort to get cash out of their essentially free homes. The tax dollars, if they were spent at all supporting a government program, would have been better spent educating low income people in economics and finance.
The real rub in the Shelter Care Plus debacle is that it, or programs like it, are still in existence in Cleveland. But then the only requirement for a Liberal program to be considered successful is whether or not it can obtain taxpayer dollars to fund it, and all other metrics of failure should be ignored.