Thursday, July 09, 2009

Congressional Report on Housing Crisis

Not a bad read by the Committee on Oversight and Government Reform. It goes over how the legislative drive to increase home ownership contributed to this mess. Too bad the author(s) are simply designated as 'staff'.

It quotes Nobel Know-It-All Joe Stiglitz circa 2002 (with current OMB director Peter Orszag):
“the risk to the government from a potential default on GSE debt is effectively zero,” and that “the expected cost to the government of providing an explicit government guarantee on $1 trillion in GSE debt is just $2 million."

It ends with a taste of why this won't go anywhere, noting Barney Frank has "asserted that those who criticize these policies seek to place blame for the financial crisis solely on borrowers of modest means", but then references a piece that is a bit more, uh, frank: "Frank Says GOP Housing Attacks Racially Motivated". This highlights how we got into this mess, in that the 20% down payment, or income verification criteria, was deemed racist, so indefensible.


Anonymous said...

Perhaps it should be called republican congressional report on housing crisis:

Anonymous said...

Efficient market hypothesis clearly implies that reducing down payment standards inexorably leads to worse terms for banks attempting to move mortgages off their balance sheets. Liberal ideology can't trump the profit motive.

(I've enjoyed the videos for your book very much, will probably buy it soon BTW.)