This is not “tongue-in-cheek.”
Why is it that I–not highly educated, and not an economist–can see how foolish it is to give home loans in amounts that the borrowers cannot afford, and subsequently will not be able to repay?
Within my family, a while back, I observed a young relative buy a house whose value was clearly above what he could afford.
Now, a couple of years later, he says he is losing his house.
Why did our government mandate such loans in the name of affirmative action?
The Heritage Foundation says this today:
Campaigning in Colorado yesterday Barack Obama blamed the financial crisis on “a culture of deregulation.” No, we don’t know what this means either. Pressed for specifics, some on the left manage to identify the 1999 Gramm-Leach-Bliley law as the deregulation source for all our problems. But as we have detailed before, Gramm-Leach-Bliley is not to blame for the current crisis. In fact, it has actually been key in helping the federal government manage financial institution failures.
The financial crisis we are experiencing today is not the cause of too little government interference in markets. It is the cause of too much. The simple fact is that for the past 30 years or so, the United States has not had a free market in residential real estate. Instead, a massive government duopoly, made up of the government entities Freddie Mac and Fannie Mae, control more than half of home loans in the United States. For almost two decades , conservatives have been warning about the systemic risk Fannie and Freddie pose to the U.S. financial system. But conservative efforts to cut Fannie and Freddie off from their government advantages have always been stymied by the left.
To this day, the left’s leaders in Congress still deny the integral role Freddie Mac and Fannie Mae played in the housing bubble and the resulting financial crisis. The facts say otherwise. Since 1995, Fannie and Freddie have been buying subprime securities to help meet government-directed affordable housing goals. At first they started at slow, but by 2004 Fannie and Freddie bought 44% of the entire subprime market. Their biggest customer was Countrywide Financial , which is now infamous for failing to perform due diligence before issuing the loans the subprime securities were based on. Even when states like Georgia tried to tighten mortgage lending standards, Fannie Mae and Freddie Mac threatened to stop doing business in the state and turn Georgia into “a financial pariah.”
While I fault the government for its negligence and its role in bringing us to this day, I also fault individuals for buying houses (and anything else) they cannot afford. We must stop this nonsense.