Federal Regulations Helped Spawn Mortgage Crisis

by Hans Bader on August 20, 2008 · 2 comments

Federal “affordable housing” and “diversity” mandates helped spawn the mortgage crisis.  Additional evidence comes from a Washington Post story, which notes that  “even late in the housing bubble, Fannie Mae was drawn to risky loans by a variety of temptations, including the desire to fulfill government quotas for the support of low-income borrowers.”  As Slate‘s Mickey Kaus noted today, that shows that “government regulations . . . may also have been at least partly to blame for the risky subprime-loan-backed securities” that Fannie Mae and Freddie Mac purchased in vast quantities.

A Wall Street Journal news story and editorial today discuss the bad finances of the government-backed mortgage giants, Fannie Mae and Freddie Mac, over which taxpayers may take a huge hit because of federal mortgage bailout legislation.  Investment analysts believe the government may soon have to pump $20 billion into each of the two mortgage giants just to keep them afloat, according to today’s New York Times.

Dreadnaught August 20, 2008 at 7:36 am

How could this be? Laws did not help the free market? Low-income borrower = someone who could not save for a down payment. This also is someone who is unlikely to make all of his mortgage payments in the future.

thackney August 23, 2008 at 2:57 am

The economic affirmative action policy put in place during the Clinton administration forced banks to issue "low income (bad) loans." Wealth redistribution was the aim of this liberal policy since wealth would flow from the middle to lower class when the inevitable bailout came due. This has made the middle class poorer and the lower class richer.

The poor are not poor by accident. They either refuse to be educated, refuse to work hard, or have not been in the country long enough to build wealth. As always, anti-merit liberals favor instant gratification and social engineering by big government.

Comments on this entry are closed.

Previous post:

Next post: