Peter Wallison's new book Bad History, Worse Policy: How a False Narrative About the Financial Crisis Led to the Dodd-Frank Act lays out the real reason for the 2008 financial calamity from which we have never robustly recovered. The lies sold in the Obama-friendly media about why things collapsed are easily debunked. The problems began with Jimmy Carter's 1978 "Community Reinvestment Act" and were exacerbated in the Clinton years. Do-gooders in government decided that more Americans needed to be homeowners and attempted to create a government apparatus to ensure they reached their goal. This ultimately helped created the housing bubble. Easy money, easy credit, no standards. Wallison spoke recently at an AEI conference. Washington Free Beacon captures the essence:
"The government created Fannie Mae and Freddie Mac to buy home mortgages from banks in order to free up capital at those banks and permit more loans. And according to a 1992 piece of legislation, 30 percent of the home mortgages that Fannie Mae and Freddie Mac bought had to be from individuals at or below the area’s median income level.
The 1992 legislation also gave the Department of Housing and Urban Development the power to raise the requirement. By 2005, 55 percent of all mortgages bought by the two government-owned mortgage-backing institutions were for low-income individuals .
While Fannie and Freddie could meet the initial 30 percent requirement without too much trouble, the steadily increasing requirement forced the two institutions to lower their underwriting standards for mortgages. They reduced the minimum FICO credit score and began accepting mortgages with no down payment—two of the most important indicators for the quality of a mortgage."