Friday, December 23, 2011

The Republi-CON Zombie Myth That the Government Forced the Banks to Make Bad Loans

UPDATE II: How does the Big Lie, "that Fannie Mae and Freddie Mac started the housing crisis," work? Read The New York Times, The Big Lie.

UPDATE: The 'Big Truth' is that the financial crisi was caused when "Congress allowed Wall Street to self-regulate, and the Fed the turned a blind eye to bank abuses." Read the Washington Post, What caused the financial crisis? The Big Lie goes viral.

Those Republi-con zombie myths live on. But it is not true that the government forced banks to make bad loans. The vast majority of subprime loans were made by independent lenders not covered by government banking regulations. Read:

Businessweek, Community Reinvestment Act had nothing to do with subprime crisis,

New America Foundation, It's Still Not CRA,

Economist’s View, Yet Again, It Wasn't the Community Reinvestment Act. . .,

The American Prospect, Did Liberals Cause the Sub-Prime Crisis? (Conservatives blame the housing crisis on a 1977 law that helps-low income people get mortgages. It's a useful story for them, but it isn't true.), and

Rortybomb, Bloomberg’s Awful Comment; What Can We Say For Certain Regarding the GSEs?, which notes:

Highly respected analysts who have looked at these data in much greater detail than Wallison, Pinto, or myself, including the nonpartisan Government Accountability Office, the Harvard Joint Center for Housing Studies, the Financial Crisis Inquiry Commission majority, the Federal Housing Finance Agency, and virtually all academics, including the University of North Carolina, Glaeser et al at Harvard, and the St. Louis Federal Reserve, have all rejected the Wallison/Pinto argument that federal affordable housing policies were responsible for the proliferation of actual high-risk mortgages over the past decade.
You might also re-read earlier posts regarding this old but tired Republi-con myth:

More Proof That Republi-cons are at Fault for the Economic Mess,

Republi-Con Myth Busters, and

Problem, Causes and Professor NoBull's Solution for the Economic Mess.