 billpar says: In analyzing the mortgage crisis, economist Walter E. Williams has written: “Starting with the Community Reinvestment Act of 1977, that was given more teeth during the Clinton administration, Congress started intimidating banks and other financial institutions into making loans, so-called sub-prime loans, to high-risk homebuyers and businesses. “The carrot offered was that these high-risk loans would be purchased by the government-sponsored enterprises Fannie Mae and Freddie Mac. Anyone with an ounce of brains would have known that this was a prescription for disaster but there was a congressional chorus of denial,” he added. “The financial collapse of Fannie Mae and Freddie Mac is not a failure of the free market because lending institutions in a free market would not have taken on the high-risk loans,” said Williams. “They were forced to by the heavy hand of government.” During Geithner’s Senate testimony, he admitted that both Fannie and Freddie played a central role in the financial crisis, telling Sen. David Vitter (R-La.) that the two government-sponsored enterprises (GSE) were a “core part” of the country’s financial woes. “Absolutely,” Geithner said. “Fannie and Freddie were a core part of what went wrong in our system.” Geithner explained that the administration did not have the time to come up with coherent regulations regarding Fannie and Freddie because of its other legislative priorities. “We did not believe that we could have, in this time frame, lay out a sensible set of reforms to guide and determine what their future will be,” said Ge... |
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