The Blog @ Spolitics

Congress Was Pushing Risky Loans

Big-government types are using the housing crisis to push for more government intervention in the markets. Perhaps the real problem was too much government involvement. We’ve already commented on the role HUD played in the current mortgage meltdown. We’ve also mentioned how Uncle Sam was throwing money at the housing industry. In addition, the implicit government backing of Freddie and Fannie enabled the companies to take risks they wouldn’t otherwise have been able to afford. Now we have revelations about the role Congress played pushing risky loans.

Indeed, executives of both companies [Fannie Mae and Freddie Mac] maintain that one of the reasons the firms hold so many bad loans is that Congress has leaned on them for years to buy mortgages from low-income borrowers to encourage affordable housing. In 2004, Freddie Mac warned regulators that affordable housing goals could force the company to buy riskier loans.

Later, the article states:

However, the companies were constantly under pressure to buy riskier mortgages. Once, a high-ranking Democrat telephoned executives and screamed at them to purchase more loans from low-income borrowers, according to a Congressional source.

The key question to ask now is which members of Congress were pressuring them to buy risky loans and whether or not they were “Friends of Angelo.”

In all, we have Uncle Sam using tax dollars to help people buy homes, pressuring companies to buy mortgages from people who can’t really afford their homes, and then using tax dollars again to bail everyone out when the mortgages go bad — something all the players expected all along. This wasn’t a failure of a “free” market.