GSEs and the Housing Crisis: Studies Ignored

by Guest Author Fabius Maximus Summary: Among our most serious problems is the success of well-funded engines of propaganda at manipulating public opinion, making effective public policy reforms almost impossible. Here we examine one example, convincing Americans that the government caused the housing bubble. This is a follow-up to Facts are an obstacle to the …

Six Rebuttals to the Argument that Congress or Fannie and Freddie Caused the Crisis

by Guest Author Mike Konczal

Sigh. Mayor Bloomberg:

“It was not the banks that created the mortgage crisis. It was, plain and simple, Congress, who forced everybody to go and give mortgages to people who were on the cusp… But they were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will. They were the ones that pushed the banks to loan to everybody.”

It seems there are people who can’t accept that some markets, particularly financial ones, are disastrous when completely unregulated — and thus find any far-fetched excuse to blame the government instead. Since this line of argument continues to pop up, how should one respond to the idea that Congress and Fannie Mae/Freddie Mac caused the housing crisis? Here are six facts to back you up:

Explaining the Housing Bubble

In the simplest terms, the housing bubble was caused by a flood of liquidity chasing mispriced risk.