For some time now, anytime anyone asks me how real estate went from boom to bust almost overnight, my answer has been, “Look at Congress.” I know that a lot of people disagree with me on this. In fact, I would say that most of the time I give my answer, I get an argument which blames the banks, greed, corporate America… the list goes on. But as I see it, Congress passed the laws that allowed these other factors to come into play.

It may sound simplistic but if Congress hadn’t deregulated banking, usurped state gambling laws that made credit default swaps illegal, or encouraged banks and the FED to come up with ways to make loans to unqualified buyers, then we wouldn’t be where we are today.

But what was in it for members of Congress? Why would they have approved all of these new laws? Well, there are a number of answers and none of them are good. They typically range from a lack of knowledge regarding economic history to lobbying. But one other reason that doesn’t come up too much is corruption.

An article in the Washington Times shows that political corruption may very well have played a role in the melt-down of real estate markets. Rep. Darrel Issa, chairman of the House Oversight and Government Reform Committee is asking the House Ethics Committee to investigate four representatives. The unnamed congressmen (or women) may have received substantially discounted home loans from Countrywide Mortgage; now a part of Bank of America.

This isn’t the first time that this has come up. Countrywide provided discounted loans to several members of the Senate. Now it appears that House members were also involved.

Although the members being investigated have not been named publically, they are a bipartisan group including one Democrat and three Republicans. Nice to know that they can cooperate on something, isn’t it?

Share and Enjoy