This is the Cato Daily Podcast for Tuesday, September 1st, 2009. I'm Caleb Brown.

As the housing bubble was being inflated, the signs were there and they were ignored according to

Johann Norberg, author of the new Cato book Financial Fiasco, how America's

infatuation with home ownership and easy money created the economic crisis.

We spoke following a forum for the book today.

You said in the forum today that during the construction of the housing boom,

quote, the invisible hand was nowhere to be seen. the financial markets and on every step along the way when it comes to monetary policy

housing policy financial regulation we see the very visible hand of

governments of regulation that affects and often distorts behavior.

And that's what we see when the credit bubble was inflated, how easy money from the Fed, lowering of interest rates made it interesting suddenly to borrow,

create a lot of leverage, the housing bubble was formed, and at the same time we had the political pressure to

constantly increase the rate of home ownership through by a different sort of

deductions and government insurance policies and the government sponsored enterprises

Fannie Mae and Freddie Mac with their sole purpose of making sure that more mortgages

housing loans were given to people who weren't on the market before.

So we had a lot of political and regulatory pressure

to make sure that we had a very, very large credit and housing bubble.

Hindsight is 2020. very large credit and housing bubble.

Hindsight is 2020 and I don't think any libertarian would dispute that a lot of these

institutions that had been built up by the government,

subsidized by the government to promote certain borrowing or lending or

purchases are inappropriate on their own merits.

...