Martin Neil Baily and Douglas J. Elliott's narrative--that a decline in risk aversion was the ultimate cause of the financial crisis--accounts for much of the risk taking that was observed in the period leading up to the crisis, but in the end it is no more than an interesting theory.

In less than twenty-five years, government “affordable housing” and other housing policies have turned a healthy market into a financial ruin. Until Fannie and Freddie’s market dominance and the government’s role in the housing finance system are substantially reduced or eliminated, the United States will continue to have an inferior and unstable housing market.

Friedrich Hayek, the famous free-market critic of central planning, were he alive today, would have the same views as US conservatives about ObamaCare and the Dodd-Frank Act.

The New Deal failed to reduce unemployment, and the policies of the Obama administration and the Democratic Congress since the financial crisis look to be a repeat performance.

Sympathy runs dry for Condoleezza Rice"s fiasco-laden State Department, butit hasthe opportunity to reverse its slide into interagency irrelevancy.

The financial crisis was not caused by the disorderly bankruptcy of Lehman Brothers, but by a common shock to all firms: the decline in mortgage values after the housing bubble collapsed, exacerbated by mark-to-market accounting.

The fundamental flaws in the housing finance provisions of the DFA cannot be repaired by regulation; they should be repealed and replaced by a plan developed at AEI.

Instead of trying to find ways that government can remain involved in housing finance, the new Congress should consider how to withdraw the government from any role in financing prime mortgages and implement various promising private-financing mechanisms--covered bonds, the Danish system, and a more focused and regulated securitization system.