Sunday, December 7, 2014

Where is the roads and bridges settlement?

It was a big con game, and many of the biggest con artists believed their own hype. "It can never go down!" they cried. They delivered something valuable to people who couldn't afford it, told them it was even more valuable, took a hefty cut for themselves, and left their victims on the hook for billions. But the government has been slow to make them pay.

In part that's because many of those responsible are in government, and many others in government are their friends. In part it's because most of the government regulators were asleep on the job. But mostly it's because so many in the public were asleep too. A lot of them still don't think anybody did anything wrong.

I'm talking about the housing bubble, yes, but not the mortgage fraud. You see, it's hard to tell how much of the bubble came from hype about loans that pay their own interest, and how much came from empty promises of roads and bridges that pay their own maintenance.

Tales of endlessly rising demand for housing and fantasies of endlessly rising demand for driving fed off each other: the new housing pumped up traffic measurements, prompting governments to build and widen roads and bridges, and the new roads and bridges pumped up housing prices, prompting developers to build more housing. In 2008 it all crashed, and if the stimulus hadn't been so focused on "roads and bridges" a lot of it would have stayed crashed.

There's a little good news on the mortgage front: this year the state has brought in over five billion dollars in settlements with several large banks. But when will we see a similar settlement for the road-and-bridge fraud? When will the government sue the people who got us to pay hundreds of millions for these projects that left us on the hook for decades of maintenance?

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