The complete and total break down of the mortgage industry. It’s the primary reason you may have lost your home, are underwater with your mortgage, or can’t find a job. It was not Wall Street greed, it was the federal government who tinkered with the rules and screwed it up for everyone.
“Everyone should have the opportunity to own a home.” Hogwash. Even George W. Bush said it.
In short, too many high risk loans were approved, and that process was supported and encouraged by the government. Approval standards were lowered. When not enough high risk, subprime mortgages were being approved by private institutions, the government threatened lawsuits. When that still wasn’t enough, Freddie Mac, Fannie Mae and the Federal Housing Authority (federal government institutions) were lined up to provide subprime loans and buy high risk mortgages from the banks.
My summary above is short, and no doubt it skips a few things, but don’t ignore those issues. Even Peter Wallison’s opinion piece in the Wall Street Journal today doesn’t cover every single reason for our financial crisis, but why are federal government policies routinely ignored or dismissed by the left and the <em>occupiers</em>?
There is no mystery where the Occupy Wall Street movement came from: It is an offspring of the same false narrative about the causes of the financial crisis that exculpated the government and brought us the Dodd-Frank Act. According to this story, the financial crisis and ensuing deep recession was caused by a reckless private sector driven by greed and insufficiently regulated. It is no wonder that people who hear this tale repeated endlessly in the media turn on Wall Street to express their frustration with the current conditions in the economy.
About the mortgages outstanding…
Research by Edward Pinto, a former chief credit officer of Fannie Mae (now a colleague of mine at the American Enterprise Institute) has shown that 27 million loans—half of all mortgages in the U.S.—were subprime or otherwise weak by 2008. That is, the loans were made to borrowers with blemished credit, or were loans with no or low down payments, no documentation, or required only interest payments.
Of these, over 70% were held or guaranteed by Fannie and Freddie or some other government agency or government-regulated institution.
Please, as you wake up this morning in your tent at your local Occupy-wherever event, fire up your iPad or iPhone and click here to read Wallison’s piece.