How Fannie, Freddie and Politicians Caused the Crisis

January 13, 2012 07:38


Government housing policies and the toxic mortgages they spawned were the sine qua non of the financial crisis.

 

By Edward Pinto at RealClearMarkets

EXCERPTS:

The federal government would now be forced to acknowledge full responsibility for the GSEs’ liabilities. While the government had in effect established the GSEs as off-balance sheet Structured Investment Vehicles (SIVs) – investors had long assumed that he taxpayers were ultimately responsible. This was a classic case of moral hazard and it had infected the $11 trillion residential debt market.

The GSEs’ contributions to the financial crisis were pervasive.

 

Over the next 12 years trillions of dollars in additional affordable housing and CRA commitments would be announced and fulfilled by Fannie, Freddie, Countrywide, and many of the nation’s largest banks.

FULL ARTICLE



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