IDEAS home Printed from https://ideas.repec.org/h/wsi/wschap/9789814651257_0004.html
   My bibliography  Save this book chapter

US Housing Policy and the Financial Crisis

In: The First Great Financial Crisis of the 21st Century A Retrospective

Author

Listed:
  • Peter J. Wallison

Abstract

Although the conventional explanation for the 2008 financial crisis is that it was caused by insufficient or inadequate government regulation of private sector risk-taking, there is compelling evidence that the underlying cause of the crisis was US government's housing policies, implemented primarily through the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. These policies, principally the affordable-housing goals administered by the US Department of Housing and Urban Development (HUD), forced the loosening of traditional mortgage underwriting standards in order to make mortgage credit more available to low-income borrowers. However, the loosened standards spread to the wider market and helped to build a massive housing price bubble between 1997 and 2007. By 2008, most of the mortgages in the US were subprime or otherwise weak. When the housing bubble deflated, these mortgages failed in unprecedented numbers, weakening the largest financial institutions and causing a financial panic when Lehman Brothers was allowed to fail.

Suggested Citation

  • Peter J. Wallison, 2015. "US Housing Policy and the Financial Crisis," World Scientific Book Chapters, in: James R Barth & George G Kaufman (ed.), The First Great Financial Crisis of the 21st Century A Retrospective, chapter 4, pages 75-100, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814651257_0004
    as

    Download full text from publisher

    File URL: https://www.worldscientific.com/doi/pdf/10.1142/9789814651257_0004
    Download Restriction: Ebook Access is available upon purchase.
    File URL: https://www.worldscientific.com/doi/abs/10.1142/9789814651257_0004
    Download Restriction: Ebook Access is available upon purchase.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:wschap:9789814651257_0004. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscientific.com/page/worldscibooks .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.