The underpinning reality is that it isn't capitalism that has failed, but socialism. The reason we had the problem with American mortgage finance giants Freddie Mac and Fannie Mae is the implicit U.S. government guarantee that it was guaranteeing their debt. If not for that, the two never would have been allowed to borrow so much money.
Americans were basically able to buy houses not on their own credit but on the credit of the U.S. government. The huge bubble would never have inflated if the U.S. had operated as a pure laissez-faire free-market economy. U.S. lending rates enabled people to attain credit too cheaply.
Poor governance of the United States has led to the maelstrom we have today. Socialism has failed, yet pure capitalism brings about disparities in society. Socialism has been blending into the capitalist model almost seamlessly since the mid-19th century.
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