Federal Regulations Helped Spawn Mortgage Crisis by Hans Bader
The Bear on Aug 26 2008 at 6:32 am | Filed under: Economy
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.
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