Government housing policy and the financial crisis.
The Cato Journal › Vol. 30 Nbr. 2, March 2010
Linked as:
Extract
Government housing policy and the financial crisis.
It is popular around the world to blame the financial crisis on the United States. But before we identify this as the usual anti-Americanism, we should perhaps look more seriously at our country's housing policies. Unfortunately, there is a strong argument that the financial crisis is indeed the fault of the United States--an artifact of the housing policies that this country has followed since the early 1990s. These policies produced an unprecedented number of subprime and other nonprime mortgages (known as Alt-A), and when the housing bubble topped out in late 2006 and early 2007, these loans began to default at unprecedented rates. In my view, the severe losses associated with these defaults caused weakness of Bear Steams and AIC--resulting in their rescue--the failure of Lehman Brothers, the severe recession we are experiencing in the United States today, and ultimately the financial crisis itself.
Before proceeding, I should define some terms. A subprime loan is generally one in which the borrower has blemished credit, usually measured by a FICO...See the full content of this document
Sponsored links
