Staff Columnist

Housing bubble was predictable and preventable, Iowa City filmmaker explains

A foreclosed home is shown in Stockton, California May 13, 2008. REUTERS/Robert Galbraith
A foreclosed home is shown in Stockton, California May 13, 2008. REUTERS/Robert Galbraith

It has been more than a decade since the U.S. housing bubble burst, helping to set off a painful global recession.

Thousands of books, academic papers and news reports have been published about the causes and effects of the housing bubble in the years since. A documentarian in Iowa City thinks policymakers still haven’t learned the right lessons.

Filmmaker Jimmy Morrison will debut his film “The Housing Bubble” this month in New York City. It’s the first in a two-part series about the crash in housing prices, the ensuing financial crisis and what might come next.

Morrison grew up in Muscatine and dropped out of college in 2006 to pursue a filmmaking career. To pay for his work, he started a house-painting business. That was about a month before home prices peaked.

Morrison already was interested in politics and economics at that point, but he stumbled upon an audiobook that sharpened his views. It was Henry Hazlitt’s “Economics in One Lesson” from 1946, a seminal work among free-market thinkers.

“I was painting a house and listening to this and thought, man, this basically describes what happened, and it was written all these years ago,” Morrison told me recently.

Hazlitt’s book decries “the fallacy of overlooking secondary consequences,” or the tendency of policymakers to measure only the immediate and local effects of government policies. Hazlitt’s approach to economics is evident in Morrison’s new project.

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“The Housing Bubble” posits that the housing market crash was brought on not only by a bipartisan effort in the preceding years to incentivize homeownership, but also by nearly a century of risky monetary policy. Injecting cash into the economy enabled people to purchase homes they couldn’t afford, and values eventually plummeted.

The script deftly weaves together and explains a slew of complicated concepts that, without appropriate context, made analyses of the financial crisis difficult to comprehend — nontraditional mortgages, adjustable-rate mortgages and mortgage-backed securities, to name a few.

When the idea for the movie materialized, Morrison was working for former New Mexico Gov. Gary Johnson’s 2012 presidential campaign on the Libertarian Party ticket. Johnson was enthused with the idea, and encouraged Morrison to quit the campaign so he could focus on it.

Morrison pitched his documentary idea to Tom Woods, a prominent political commentator whose 2009 book about the financial crisis, “Meltdown,” spent 10 weeks on the New York Times bestseller list. Woods agreed to co-write the script.

The filmmaking strategy was simple — track down people who predicted the housing bubble and interview them. Morrison told me he drove 35,000 miles for 15 interviews across North America.

The film also relies on clips from TV programs and congressional hearings to demonstrate that the collapse of house prices was predictable.

“Like all artificially created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out,” then-U.S. Rep. Ron Paul said in 2002, five years before the housing bubble burst.

The scholars featured in the film warn little has fundamentally changed since 2007, when central bankers were forced to recognize federal policy perpetuated the underlying crisis.

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“The lesson has been taught that the next time a boom comes along, be reckless and make as much short-term profit as possible because if it all blows up in your face, either the Fed or the Treasury is going to come along and bail you out anyway,” said Robert Murphy, a fellow at the Mises Institute.

Next, Morrison will focus on the second installment in his “Bubble” double feature. “The Bigger Bubble” will include many of the same sources discussing their predictions for the next financial crisis.

Given the nation’s monetary policies, Morrison said, another crash is not a matter of if, but when.

“We’ve always had crashes, it’s just a matter of how big they are and how long they take to unwind,” he said.

• Comments: (319) 339-3156; adam.sullivan@thegazette.com

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