Report: The Role of Government Affordable Housing Policy in Creating the Global Financial Crisis of 2008

Hardly news, but finally some light on the consequences of the government house initiatives of the 90's in triggering the house bubble:

WASHINGTON. D.C. – A report released today by the House Committee on Oversight and Government Reform finds that the housing bubble that burst in 2007 and led to a financial crisis can be traced back to federal government intervention in the U.S. housing market.  The report’s findings are particularly significant and relevant since President Barack Obama’s announced financial reform initiatives do not include reforms to address flawed government housing initiatives.

“The spin on the financial crisis by those who favored government efforts to erode lending standards is that the housing bubble didn’t cause this recession,” said Rep. Darrell Issa the Committee’s Ranking Member.  “The findings in this report should remind this Congress that ignoring the role of politics and government in causing the housing crisis and the economic collapse while pursing other regulatory reforms will not fix the underlying problem.”

Government intervention, according to the report, “created ‘affordable’ but dangerous lending policies which encouraged lower down payments, looser underwriting standards and higher leverage.  Finally, government intervention created a nexus of vested interests – politicians, lenders and lobbyists – who profited from the ‘affordable’ housing market and acted to kill reforms. In the short run, this government intervention was successful in its stated goal – raising the national homeownership rate.”

Read the press release of the Commettee
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