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Many of the problems were blatantly and directly caused by Government intervention, for example when they forced lower lending standards on banks in the name of
by qqq 18y ago
Many of the problems were blatantly and directly caused by Government intervention, for example when they forced lower lending standards on banks in the name of anti-racism. And Fannie and Freddie were not private companies. One thing they did was use their connection to the Government to get better deals than any private company could get (because dealing with the Government = no risk. The tax payers won't all go broke.)
- neilk 18y agoI am hearing this claim more often these days, that the government somehow caused this by 'forcing' lower lending standards, but I don't know of a factual reference. Can you help me out? The idea of home ownership for minorities probably does appeal to politicians, especially Democrats. But my understanding is that the real engine here was a worldwide glut of capital, creating demand for new sorts of high-yield securities, such as the now famous securitized mortgage pools. Finally, the worst of it only became possible with deregulation, which incents fraud committed by thousands of individual lenders (particularly victimizing low-income people). In other words I can easily imagine a Kennedy signing a bill and proclaiming "mortgages for all!" but the real force behind such a bill would be on Wall Street.
- qqq 18y agoif you type this into google you will find sources: government forced lower lending standards
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- ohhmaagawd 18y agothat didn't help.
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- gscott 18y agoOnly to banks not to private institutions which were the leaders of these issues such as AIG, etc.
- neilk 18y agoI didn't really find anything helpful, but there is a story that's going around conservative blogs that it was the liberals' obsession with extending credit to minorities that ultimately caused the crisis. There's a lot of things wrong with that story. This American Life just did a segment on it. They point out that the problem really originates elsewhere, on Wall Street, and that both conservatives and liberals share the blame here. Listen to the second segment of this episode: http://thisamericanlife.org/Radio_Episode.aspx?sched=1265 http://thisamericanlife.org/Radio_Episode.aspx?sched=1265 It's arguable that the mere existence of the Fed or FDIC does contribute to overconfidence, especially when it's pursuing a low interest rate policy.
- william42 18y agoThere's a bill called the Community Reinvestment act or something like that, except that the minorities who got their mortgages through that act have a <i>lower</i> rate of default than the general population.
- neilk 18y agoAlso, the CRA was passed in 1977. There have been a few changes since then but I'm not sure you can lay the blame there.