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  • Smoking Gun of the Housing Crisis

    At yesterday’s Bloggers Briefing at Heritage, Rep. Darrell Issa (R-CA), ranking member on the House Oversight and Government Reform Committee, touted a 26-page report that holds the government accountable for the housing crisis through its unsustainable drive to increase homeownership.

    The report sheds light on the unnecessary interference of government in the housing market. It singles out Fannie Mae and Freddie Mac to show how the U.S. entered an economic downturn that rippled around the world. (Heritage has long argued for reforming Fannie and Freddie by breaking up their stronghold on the mortgage market.)

    According to Issa, the potential for a crisis in the housing market is not a new phenomenon. The seed was planted with President Bill Clinton’s misguided eagerness to increase homeownership. Issa referenced a Clinton administration document from 1995, “The National Homeownership Strategy: Partners in the American Dream.”

    The document states, “The Clinton administration should support efforts to increase local lender awareness and use of flexible underwriting criteria established by secondary market investors such as Fannie Mae and Freddie Mac. Many households may qualify (for mortgage lending) if local lenders are encouraged to more flexibly interpret secondary market requirements.”

    Issa called this the smoking gun. He said the situation we now find ourselves in came from the humble beginnings that everyone should have the opportunity to own a home. The Bush administration, too, must shoulder some of the blame, Issa said. Bush continued these practices through its own programs.

    “The housing bubble that burst in 2007 and led to a financial crisis can be traced back to the federal government intervention in the U.S. housing market intended to help provide home ownership opportunities for more Americans,” declares Issa’s report.

    Issa’s remarks at The Bloggers Briefing are available on YouTube:

    Posted in Economics [slideshow_deploy]

    19 Responses to Smoking Gun of the Housing Crisis

    1. D.Mac, NE says:

      I highly recommend reading "The Role of Government Affordable Housing Policy in

      Creating the Global Financial Crisis of 2008".

    2. Don R. says:

      Another good read on the housing bust is Thomas Sowell's, "The Housing Boom and Bust". Actually this 26 page committee report is pretty much what Prof. Sowell wrote about in his book.

    3. NEAL says:

      I WANT TO SEE THE COMMUNICATION BETWEEN THE BANKS AND GOVERNMENT TO SEE WHO SIGNED THE ORDER FOR BANKS TO STOP THEIR TRADITIONAL LENDING POLICIES AND GIVE LOANS TO THOSE NOT QUALIFIED UNDER THE BANKS STANDARDS.IT DID NOT HAPPEN BY MAGIC,PEOPLE IN POWER DID IT ON PURPOSE!

    4. Paul, Washington Sta says:

      I do not understand why the Clinton administration continues to get a pass on this issue.

      It is well documented that this mess was born by Jimmy Carter and raised by Clinton.

      It is time that Bll Clinton, Chris Dodd, Barney Frank, Janet Reno, Andrew Cuomo and Jamie Gorelic are held culpable for a worldwide economic crisis.

      Expose them for what they are, throw out in the street naked.

    5. Keith somewhere in t says:

      Do private investment firms share some of the blame?

    6. DAG, Round Rock,TX says:

      Unfortunately, it appears that the higher is the crime, the lesser chance for punishment exists. The housing bubble is not the last crime ( even unintentional ) the "social engineers" at the highest level of executive and legislative power are going to commit since they have no personal responsibility for professional malpractice. Add to the above government watchdog organizations' malpractice habits and a recipe for the next disaster is complete.

    7. Ocala200, Ocala FL says:

      The housing bubble did NOT burst in 2007. It was 2005. At that time EVERY area was over-built, supply was at an all time HIGH, people started REDUCING their prices by thousands of dollar in 2005. Sellers "time on the market" increase lots. It was in 2005 that suddenly Sellers were unable to sell to buy the next one. The CRITICAL mistake is the BUILDERS that continued to build full bore in 2005, 2006, 2007, 2008, 2009. This only created MORE inventory of unsold homes. Supply and demand. If Walmart had 10,000 cans of coffee and only sold 1,000 a month, they would not keep ordering coffee. But the builders knew the sales figures were down and didn't stop building. Everyone has blamed someone.. why is nobody also blaming the builders? Car manufacturers did the same thing – sales were down, but they just kept building the same quantity, only making the inventory go higher and higher.

    8. David, NY says:

      Check out The Skinny on the Housing Crisis by Jim Randel. A very cool and honest look at the bubble.

    9. uppitynap Wall NJ says:

      Now just think what will happen if they get their hands on our Healthcare it is Obvious the Congress and WH need to be stop first by our voices and second by our VOTES!

    10. Tom, Georgia says:

      Folks,

      We could all spend the remainder of our lives playing "whodunit", casting blame and pointing fingers with this issue. Fact is, what has been done has been done and where we are is where we are. It is where we go next that is the important thing along with how do we get our nation out of the financial ditch that it was put in by likely millions of people who found a way to benefit in some way by taking advantage of a system of financial irresponsibility that had been conjured out the muddled minds of generations of our "leaders" in Washington.

      We will have to do it the hard way and that will be with a lot of heavy lifting by all of us. It can only be done by the nation's people. The government that got us here will likely find ways for the people to have to trip over it but if we expect much beyond an impediment from Washington then we should also expect to be disappointed. We who live in the fifty states of The United States can expect to have to continue to send massive amounts of foreign aid to the oddball little foreign country that we call The District of Columbia.

      We must be willing to invest our time, talents, energy and money into value creating economic assets. We must stop trying to prosper by playing financial games. The nation's private sector goods and services economy produces and creates one hundred percent of the nation's purchasing power. We must have a productive economy if we are to have the prosperity that we want for ourselves, our children and grandchildren. We have now tried "financialism" and have found that it doesn't work. The time has come for a return to capitalism.

      The one thing that we need and must have from our governmental policy makers at all levels of government is for them to reduce the percentage of the nation's purchasing power that is being sucked up, used and dissipated by governments.

      The supply side is the economy and the economy is the supply side. The economy produces and provides our purchasing power as it produces and provides goods and services to our markets. The demand side is either a part of the nation's society or it is a part of the nation's governments. Period.

      Our nation's goods and services economy is on life support and it is we, the people of the nation, who must give it life. Period.

    11. Tom, New Jersey says:

      Finally, an honest answer on the governments heavy hand and the results on society and free markets. Builders were more willing to continue to build knowing that almost anyone could qualify for backed loans. Lenders were willing to lend as much debt that Fanny and Freddie would absorb. This formula of social engineering and market interventions all being facilitated by the powerful influence of corrupt actors in government with ill-conceived intentions. Chris Dodd and the AIG debacle is a glaring example of the twisted manipulation of the truth, and government coersion of the financial system, all done in the effort to maintain donkey power and the progressive movement.

    12. Pingback: Housing Crisis Caused by Government « The View from Southern California

    13. Ben C, Ann Arbor, MI says:

      As with all problems the volumes of rhetoric and print ulitmately boil down to a few simple truths. This is the process.

      As for the whole global financial mess there appears to be enough blame to pass around but as I seed it governmental agendas always seem to be at the core. The problem is the domino effect when the house of cards begins to collapse. Thus all of the fingerpointing

      My friend who is a mortage lender pointed out the whole subprime mess to me years ago. She was scolded by management for not approving mortages to people who could not pay – but qualifiied under the Clinton agenda of "The American Dream."

      One can argue this program brought great prosperity to the US as Clinton supports will claim and for the short term was true. Unfortunately paying for governmental social agendas seems to be overlooked by those in power. After all, when it comes time to pay the piper the instigators are long gone. The tax payers are the ones left picking up the tab.

      It is exacttly this reason that I am against governmental social engineering.

    14. Jerry from Chicago says:

      The banking crisis is proof positive that no good deed goes unpunished. Assuming for a moment that the Community Reinvestment Act was motivated by the purest of motives, helping "less well off" people achieve the American dream. Here again, we have a problem of people not defining their terms. How far down are we supposed to go in determining "less well off" people? Are these the people who make less than $50,000 a year? Less than $30,000 a year? How about no income,no job or assets? You know, N.I.N.J.A. loans.

      Who decides that owning a home is thee American dream? I'm an American and my dream is hitting the lottery for several millions and living a life of luxury. Why isn't the government trying to help me achieve my American dream?

      When you are a banker, you are supposed to be a good steward of other people's money. You asked people to put their money in your bank, giving them the assurance that it would be safe and would earn interest. Let's say that you have a good heart and feel sorry for people who are broke, have no job (or a really low paying one) and REALLY need money, so you 'loan' them the money given to you by others who earned it. Now, the people who earned this money, trusted you to manage it for them and deposited it in your bank come to take it out. And now you have to tell them, I'm sorry but we loaned your money to people who really needed it and they couldn't pay it back and now we have nothing to give you.

      If you feel sorry for poor people, please feel free to give them all of YOUR money. Don't give them what belongs to someone else. ROBIN HOOD WAS A FICTIONAL CHARACTER.

    15. Audie, Lubbock, Texa says:

      Tom in Georgia and Larry from the great Republic of Texas–great insight and truth. What a mess our country is in. The people wanted "change" in November of 2008. Well, they got it. The people of this country must use the most powerful tool available to them at the midterm elections and in 2012–the ballot. We must stop talking about "we need to do this" or " we must do that". It is time for freedom loving Americans, everyone, to become politically active at the grassroots level. If that means taking to the streets in massive protest, then so be it. Why do other countries such as Iran and China risk their lives for democracy, yet Americans sit quitely with their heads in the sand hoping that the "problems" will be taken care of by our government. Our "government" is self-serving. It is time to use the ballot to flush Washington and start over. It is time for common sense and patriotism to take up residence in the halls of Congress.

    16. David VanNorman Wi says:

      The people who ran Fannie and Freddie and got the big money should be in jail. Too many of these big wigs are being left off the hook and we are paying for them to live the good life.

    17. Ross, Bradenton, Flo says:

      Why am I not surprised at who's name surfaces as the original gunman for this debacle. I guess the Republican house and senate was bellied up to the bar patting themselves on the back at having finally become the majority in congress. Bush probably could do anything about it if he tried, after all the Republicans were self-destructing and the Democrats were gaining seats.

      I'm beginning to wonder if any of those "ladies and gentlemen" of congress even know how to read or are they the idiots they portray on the news programs I've watched. Is there any intelligent life to be found in Washington's new regime? Probably not, I haven't seen any. I know the congress is absent of any intelligent life-forms.

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