Crickets from the Ayn Randians.

The NYT article from 1999 highlights the failure of our current electoral system – not the failure of government intervention in the economy: many people have long been warning of the problems with Fannie and Freddie – but action has not been taken against them by the government because of corporate influence over our government (which makes it far more responsive to the corporate will than the public will).

http://www.newser.com/story/32397/fierce-lobbying-deflected-warnings-on-fannie-freddie.html

To say that the current economic crisis would not have occurred without the creation of Fannie Mae and Freddie Mac is a red herring and doesn’t vindicate capitalism from its repeated failures throughout history (especially given that Fannie and Freddie were created as a capitalist enterprise; the same abhorrent model libertarians and conservatives want to apply to other areas like Social Security and public education).

Institutions like Fannie and Freddie only exist because capitalism has, on many occasions, failed to improve the quality of life of the average person (which also has the effect of stifling economic growth as a whole).

Without government “interference” in the lending system – middle- and low-income residents would never be able to obtain loans to purchase their own homes and help improve their socioeconomic status through the many economic benefits that an investment like a home affords such people. Moreover, without government “interference,” the system would be woefully unstable (subject to disastrous corrections) and monopolies/oligopolies would rule over the market – using their size to unfairly crush all competition, stifle innovation, and victimize consumers.

The Great Depression was highly complex and caused by a variety of factors and to single out the Federal Reserve as the sole cause is intellectually dishonest. Even those (like Friedman) who blame the Federal Reserve don’t cite its existence as the problem – rather they say that it should have been more active when the banks started to fail. So saying that the government needs to “get out of the way” doesn’t work.

In the current situation, like the Great Depression, the government needed to get IN the way of reckless and irresponsible speculation and bring transparency to opaque corporate practices.