Marketwatch.com columnist Brett Arends asks an interesting question in his July 6 column:
“Was the housing bubble really caused by Fannie Mae, Freddie Mac, the Community Reinvestment Act, Barney Frank, Bill Clinton, ‘liberals’ and so on? That’s what a growing army of people now claim. There’s just one problem. If so, then how come there was a gigantic housing bubble in Spain as well? Did Barney Frank cause that, too (and while in the minority in Congress, no less!)? If so, how? And what about the giant housing bubbles in Ireland, the U.K. and Australia? All Barney Frank? And the ones across Eastern Europe, and elsewhere?” 
Mr. Arends is correct Barney Frank is not a Spanish politician.
His argument, however, equally exculpates others more commonly blamed by the media for the American housing bubble: George W. Bush and the Republican Party. Bush was not El Presidente de Espana. Many opinion writers put much of the blame squarely on “Wall Street”. Yet, American Wall Street firms were not a factor on the calles of Seville. To paraphrase Mr. Arends, did Wall Street cause the Australian housing bubble? If so, how?
Many countries experienced dramatic housing bubbles during the exact same timeframe as the United States. If George W. Bush “caused” the American housing bubble through supposedly lax regulation of mortgages and credit markets, is it merely a coincidence so many other varied nations experienced similar bubbles at the exact same time?
Rather than asking which politicians to blame, the better question is which common policies and conditions the bubble countries shared. Is it also possible politicians have less to do with these bubbles than many believe? Might individual consumers be susceptible to herd-like thinking, driving up prices in a feedback loop when prices are going up, then stampeding away from the housing sector bulls when the bubble bursts?I believe Spain is an excellent case study for the simple reason it experienced an even more dramatic 1994-2008 housing bubble than the United States. Catalonia and the Basques were an ocean beyond the reach of American law. In forthcoming posts, we will explore the evidence.