An easy to understand explanation of the sub-prime crisis. Interesting how some, including our president, blame the recession on Republican economic policies, such as the Bush tax rate cuts. Yeah, right.
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www.realclearpolitics.com]
From the column:
This political crusade for "affordable housing" was at the heart of laws, regulations and even threats from the Department of Justice, against mortgage lenders who failed to lend to as many low-income and minority borrowers as the politicians wanted them to.
Regardless of the additional problems that occurred as these mortgages were bought by Fannie Mae and Freddie Mac, or were later bundled into securities sold by Wall Street, the fundamental problem was that many people simply stopped making their mortgage payments -- as was perfectly predictable when lending standards were forced down by the government.
The politicians and bureaucrats who forced lenders to lower their standards had limited goals in mind -- namely affordable housing and more minority home ownership. But the repercussions when the housing markets collapsed spread all across the American economy and led to financial crises overseas, where financial securities based on American mortgages were widely sold.
All politics may be local but the repercussions reach around the world, and even extend to generations yet unborn, who will be left to cope with the national debts resulting from this debacle.
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Mr. Gorbachev, tear down this wall.--Ronald Reagan, June 12, 1987
