..President Roosevelt believed that excessive competition was responsible for the Depression by reducing prices and wages, and by extension reducing employment and demand for goods and services," said Cole, also a UCLA professor of economics. "So he came up with a recovery package that would be unimaginable today, allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies.
..The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes," Cole said. "Ironically, our work shows that the recovery would have been very rapid had the government not intervened.
It is worth remembering that FDR spawned a whole swag of relief programs, some of which remain today
The largest programs still in existence today are the Social Security System, Securities and Exchange Commission (SEC), and Fannie Mae.
There is now not much dispute that government sponsored enterprises (GSEs) like Fannie Mae contributed to if not directly caused the current financial crisis, so says *Stan Liebowitz in a report Anatomy of a Train Wreck Causes of the Mortgage Meltdown;
This report concludes that, in an attempt to increase home ownership, particularly by minorities and the less affluent, virtually every branch of the government undertook an attack on underwriting standards starting in the early 1990s. Regulators, academic specialists, GSEs, and housing activists universally praised the decline in mortgage-underwriting standards as an “innovation” in mortgage lending. This weakening of underwriting standards succeeded in increasing home ownership and also the price of housing, helping to lead to a housing price bubble. The price bubble, along with relaxed lending standards, allowed speculators to purchase homes without putting their own money at risk.
*Stan J. Liebowitz is Research Fellow at the Independent Institute and the Ashbel Smith Distinguished Professor of Managerial Economics at the University of Texas at Dallas.
