Sowell on the Housing Crisis

The Housing Boom and Bust

by Thomas Sowell

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The Housing Boom and Bust: Revised Edition

The modern housing crisis was not caused by free markets, as various politicians and commentators have alleged. Instead, as Thomas Sowell shows, it was the product of wide-ranging political interventions in the economy, including easy-money policies and legal requirements that banks make risky loans.

This reading works well for two meetings. Suggested review questions follow.

Review Questions for Sowell I: Through Chapter 3

1. What were the general real-estate trends from 2000 to 2005?

2. How does the Federal Reserve influence mortgage trends?

3. What were the land use restrictions of the 1970s, and what were their effects?

4. In Sowell's view, what was the actual nature of the "affordable housing crisis," and what was the political response?

5. What were the "creative" ways to finance mortgages, and how were they influenced by federal policy?

6. What is the history and impact of the Community Reinvestment Act?

7. What were the impacts on the housing market of Freddie and Fannie, HUD, and the FHA?

8. Who issued warnings about a housing bubble? Who ignored those warnings?

9. What was the political response to the housing bust? "How's that working for you?"

Review Questions for Sowell II: Chapters 4-5

1. What does Sowell mean by a "vision?"

2. What are the various aspects of the housing "vision" that created the housing boom and bust?

3. How does the "vision" of some relate to the narrow interest of others?

4. What was the Millennial Housing Commission and what where its findings and errors?

5. What was the brief history of political interference in housing in the 19th and 20th Centuries?

6. What were the various motivations behind the crusade against alleged lending discrimination?

7. Besides income, what are the other relevant factors related to mortgage lending?

8. How did government agencies and media outlets sensationalize lending statistics?

9. In what ways did the federal government "encourage" banks to make risky loans?

10. What impact did political interference in housing have on minorities?

11. In a political context, what is the meaning of terms like "community," the market," and "social?"

12. How are costs weighed in the market and in the political sphere?

13. Describe the background and implementation of Section 8 Housing.

14. Compare the comments of George W. Bush and Hillary Clinton before and after the housing bust.

15. What problem did the FDIC seek to address, and how was that problem caused?

16. Compare the administrations of Hoover, FDR, and Obama.

17. What is the effect on the economy and on politics of politically-funded jobs?

18. What were the major interventions of the Great Depression that Sowell reviews?

19. In Sowell's view, why did the Great Depression come to an end?

20. What is the significance of the comment, "You never want a serious crisis to go to waste"?

21. BONUS QUESTION involving optional reading: Compare and contrast the views of Sowell and Robert Higgs regarding the relationship of WWII and economic recovery.

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