The 2008 financial crisis—like the Great Depression—was a world-historical event. What caused it will be debated for years, if not generations. The conventional narrative is that the financial crisis was caused by Wall Street greed and insufficient regulation of the financial system. That narrative produced the Dodd-Frank Act, the most comprehensive financial-system regulation since the New Deal. There is evidence, however, that the Dodd-Frank Act has slowed the recovery from the recession. If insufficient regulation caused the financial crisis, then the Dodd-Frank Act will never be modified or repealed; proponents will argue that doing so will cause another crisis.
A competing narrative about what caused the financial crisis has received little attention. This view, which is accepted by almost all Republicans in Congress and most conservatives, contends that the crisis was caused by government housing policies. This book extensively documents this view. For example, it shows that in June 2008, before the crisis, 58 percent of all US mortgages were subprime or other low-quality mortgages. Of these, 76 percent were on the books of government agencies such as Fannie Mae and Freddie Mac. When these mortgages defaulted in 2007 and 2008, they drove down housing prices and weakened banks and other mortgage holders, causing the crisis.
After this book is published, no one will be able to claim that the financial crisis was caused by insufficient regulation, or defend Dodd-Frank, without coming to terms with the data this book contains.
Peter J. Wallison
Most Helpful Customer Reviews
One of the best - perhaps the best - explanation of the financial collapse of 2008. Most "explanations" of the cause of the crash are really a description of "What" happened: packages of mortgages (which contained some bad stuff) being traded between banks and others, which led to a financial collapse, which led to an economic downturn. In his book Peter Wallison takes us back to what created the circumstances for the mortgage meltdown: The government policies - under both Clinton and Bush II - that forced the lowering of underwriting standards, in the intent of increasing homeownership. This resulted in a higher and higher percentage of subprime mortgages (the bad stuff). Without so much of the "bad stuff" in the mix, there could not have been the "mortgage meltdown". This book demonstrates that the subprime mortgages, almost by definition, were bound to fail. Wallison gives us one very telling statistic, for 30 years - right up to...
The analysis here of causes of the 2008 financial crisis is wholly persuasive, well-documented, and clearly written. The crisis began with the Federal Government's desire to "help" low-income Americans borrow money in order to buy homes they could not afford, and it did so by making such loans directly through the FHA or through the government-sponsored entities (GSE) or banks Fannie and Freddie. The creation of these sub-prime loans accelerated in the 1990s through the efforts of various community activist organizations such as the now defunct ACORN, for which President Obama used to work, and the United States Department of Housing and Urban Development (HUD).
HUD, spurred on by community activist organizations, began requiring Fannie and Freddie (and mainstream banks) to make an increasingly large percentage of their loans to individuals without any down payment, bad credit histories, and low income. Fannie and Freddie were fully complicit with these directives...
This book is must reading for anyone who continues to believe more and bigger government is the solution to all our problems. Until our leaders/politicians are willing to own up to and be honest about their own mistakes rather than trying to hide them through spin, Washington does not deserve our trust and confidence. This book is methodically researched and written to show the root causes of the 2008 mortgage crisis. It makes clear Washington's own culpability in causing the crisis and that subsequent investigations covered that up. It also makes the valid point that until Washington is honest with itself about the causes of a problem, it will be incapable of legislating solutions to prevent them from reoccurring in the future. Dodd Frank was passed to carry out an political agenda and did not put in place laws that would have prevented the mortgage crisis from occurring in the first place.
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