September 25th, 2009 Yes, Washington did help cause the financial crisis
Posted by: James Pethokoukis
"There are, to be sure, lots of villains to blame for America’s financial crisis: regulators, Wall Street executives, credit ratings agencies, Alan Greenspan.
"But the one baddie Washington doesn’t want to touch is, well, Washington. Its crime: pushing federal policies that favored ever-increasing home ownership, particularly from the mid-1990s on, and thus helping spawn the housing bubble at the center of the devastating meltdown. (We’ll focus on its legacy of financial bailouts another time.)
"The sheer scope of the bipartisan, federal pro-housing undertaking is mind-boggling.
As Jeffrey Miron, a Harvard University economist, noted in testimony this week to the House Financial Services Committee, a list of past and ongoing efforts would include the Federal Housing Administration, Federal Home Loan Banks, Fannie Mae, Freddie Mac, the Community Reinvestment Act, the deductibility of mortgage interest, the tax-favored treatment of capital gains on housing, the HOPE for Homeowners Act and the $8000 homebuyer tax credit...
"Even former Federal Reserve chairman Paul Volcker conceded this week to the same committee that government housing efforts, in the form of Fannie and Freddie, were a “factor” in the crisis."...