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March 27, 2009

Financial crisis can be traced back to Freddie Mac and Fannie Mae

Topics: Political News and commentaries

As Steve Foley notes this morning at TMR, the biggest reason that America now faces a financial crisis is most likely the housing bubble. As for the cause of the bubble and the reason that there are now so many foreclosures causing so much damage in the rest of the financial sector, it should come to no one's surprise that the cause can be traced back to government policy mistakes.

In the video below, Peter J. Wallison of the American Enterprise Institute specifically highlights the destructive impact of two government-created entities known as Fannie Mae and Freddie Mac (whose policies resulted in 25 million junk mortgages), and concludes with four key lessons that explain how to avoid similar mistakes in the future. It is well worth taking the time to watch it all: Government Intervention, Regulatory Policy, and the Financial Crisis:

Related: Did the Fed Cause the Housing Bubble? (Some blame Fed but recognize Congress's reckless housing policies through Fannie Mae and Freddie Mac and the Community Reinvestment Act.)

Posted by Hyscience at March 27, 2009 7:31 AM

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