'Meltdown' author blames policy and Fed

WASHINGTON, March 19 (UPI) -- Historian Thomas Woods claims the current financial crisis can be squarely pegged as the result of bad policy and the actions of the U.S. Federal Reserve.

Woods's new book, "Meltdown, A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse," says the government created the housing bubble through lenient policies granted the Federal Home Loan Mortgage Corp. and the Federal National Mortgage Association, CBS News reported Thursday.

Woods, who also wrote the bestseller "The Politically Incorrect Guide to American History," is a conservative who has a doctorate in history from Columbia University and is resident scholar and senior faculty member of the Ludwig von Mises Institute.

In addition, federal tax-free capital gains law and the Fed's long-standing low interest rates that made lending more affordable pushed the housing market into collapse, Woods contends.

Former Fed Chairman Alan Greenspan "sought to reignite the economy through a series of rate cuts," Woods wrote. "New money and credit overwhelmingly found its way into the housing market, where artificially lax lending standards made excessive home purchases and speculation seem to many Americans like good financial moves."

The federal response, he wrote, isn't just inadequate, it is headed in the wrong direction. Woods advocates allowing banks to fail and to quit offering bailouts.

In response, Greenspan wrote Wall Street Journal editorial a week ago called, "The Fed Didn't Cause the Housing Bubble."