Originally Posted by
UnderDawgAl
Rather, it was because of Barney Frank and Ted Kennedy, among others in Congress, who sponsored legislation requiring a certain percentage of loans being given to non-credit worthy recipients in order to overcome perceived disparities in the housing market. The whole subprime mortgage crisis was a direct result of their legislation. Recall that the lenders got vilified and politically crucified, but no one admonished the legislators that forced the crisis into existence. Freddie Mac and Fannie Mae execs got off scott-free. That legislation helped drive up prices, drive up demand, and drive up the number of subprime mortgages that were doomed to failure from the start.
Though opinions vary, the majority opinion (among economists who have studied this) appears to be that Fannie Mae, Freddie Mac, the CRA, and the Housing and Community Redevelopment Act did contribute to the crisis but were not primary factors. Those were the main agencies and programs through which the federal gov't pursued the long-standing (and bipartisan) goal of extending homeownership to lower income earners -- in the case of Fannie and Freddie, by requiring them to purchase and back more mortgages from such households. Note that this did not require lenders to sell subprime mortgages.
Also, note some of these policies that led Fannie and Freddie to purchase lower quality mortgages left much latitude to presidential administrations -- and while Clinton did raise those requirements, G.W. Bush raised them still further. No one is blameless....But most of the blame goes to poor regulation of lenders and their practices, an out-of-control (and virtually unregulated) derivatives market, CDOs, and a downturn in real estate values.