---

Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse
...The broad case for government as the cause of the meltdown is offered in chapter two. Woods names six “culprits.” First are Fannie Mae and Freddie Mac, the government-sponsored enterprises that dominate the mortgage market. Largely immune from profit and loss, and able to “make markets” in ways that truly private firms are not, Fannie and Freddie created implicitly government-backed markets for trading mortgages and mortgage-backed securities. This encouraged mortgage originators to keep creating new mortgages, however risky, knowing that Fannie and Freddie could use their special line of credit at the U.S. Treasury to buy those up and resell them on the secondary market. This was hardly a “free market.” Rather it was one in which these creatures of government operated without being subject to the market’s own normal regulatory processes–namely, profit and loss and risk management...

...But the bulk of his blame lies with the Fed. Woods offers a complete analysis of the Fed’s role in the context of an accessible account of the Austrian theory of the business cycle. He clearly explains the interaction of savings, time preferences, and interest rates under stable monetary conditions in order to show what happens when the Fed intervenes with an expansionary monetary policy. Chapter five follows up with a good discussion of the myths of the Great Depression....