Aside from the occasional scandals, I suppose it should be of no surprise that Congress passed and President Bush signed into law a bill loaded with giveaways to bailout the housing sector.
From what I have read about the bill, I suppose the only refreshing thing about it is that only at-risk lenders and borrowers (whatever that means) will recieve assistance. None the less, no matter who recieves this money, the end result is the same: the term of the present depression (not recession) we are experiencing will be worse and take longer to recover from.
The unfortunate part about the whole credit debacle is that, in the media and in Congressional inquiries, the one institution that remains almost entirely blameless and is the root cause of our economic misery is, you guessed it: The Federal Reserve.
As Dr. Hans Sennholz had correctly pointed out, citing works such as Professor Edward R. Tufte's 1978 work Political Control of the Economy, The Fed acts like a re-election campaign committee to pump money into the economy in support of the present White House administration, in this case President George W. Bush.
Before it started its printing presses in 2000, The Fed bought securities from the U.S. Treasury that usually total in the hundreds of millions, if not billions, of dollars to initiate credit creation with the help of its member banks.
Since then The Fed has tried to stave off the effects of the tiny, but turbulent, recession that resulted under the direction of Alan Greenspan which lead to the stock market and the present housing bubbles. Ultimately, The Fed controls the timing and depth of a recession by controlling the timing and amount of money it creates.
However, one thing The Federal Reserve cannot do is stop a recession without the pains of economic readjustment in the form of recessions or, in this case, depressions.
This is usually due to a shrinking of the money supply which is the result of The Fed refraining from printing more money commonly associated with raising interest rates.
With the economic fortunes reapted from The Fed's actions, and because of the popularity he recieved as a result of September 11th, the Republicans rode President Bush's coattails in 2004 to regain control of Congress. But now they will have had their electoral fortunes further dashed due to the economic woes people are experiencing which are associated with the President but are really the results of The Fed's policies.
What is happening now is a prime example of the Austrian theory of the business cycle.
Due to artificially low interest rates, credit creation encouraged by the U.S.'s central bank contributed to malinvestments, if not outright distortions, in sectors of the economy resulting in massive amounts of consumption (mainly geared towards housing) which, unfortunately, require recessions to correct.
With its continuous interventions to pump even more liquidity into markets, like The Fed's underwriting a loan for JP Morgan Chase Bank to acquire Bear Stearns, the end result is even longer readjustment periods.
When Herbert Hoover and F.D.R. enacted their economic policies, the period known as The Great Depression was extended far futher thanks to constant government interventions then like we are seeing now.
Such as immigration controls, propping up unsound businesses; imposing new banking rules; inflating credit; expanding public works; and forcing up wage rates.
Rather than let the market go about its business of adjustment, which would have pulled us out of The Great Depression sooner, it was intervention after intervention that The Fed and politicians used to try to fix the messes they created in the first place that made the situation worse.
Now they are repeating the same mistakes of the 1930's and those that contributed to the economic stagnation that occured during the 1970's.
Leave it to politicians and bureaucrats to hinder the risks and rewards of voluntary exchange and market processes while not taking into account the lessons of history.
Here we go again.