"The special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions... like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will find it difficult as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing."
- Ron Paul to House Financial Services Committee, 10th September 2003.
Ron Paul explains in the video below how he was able to make this prediction. Austrian economics.
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