Did Urban Planners Cause The Housing Crisis?

1. HUD had quotas which applied to Fannie & Freddie to issue low and moderate income mortgages. The quota requirement was uncreased many times, up to 57% of all new mortgages written, at the time of the crash. Such a huge requirement was completely insane, unnecessary and certain to end in catastrophe. Fannie and Freddie wrote 40% of all the less-than-prime mortgages.

2. Those same quotas effectively applied to all the largest banks, to make them eligible to expand.

3. Seven layers of federal regulators somehow all missed the bubble. Alphonse and Gaston rule the US. They are essentially useless, a false sense of security, and a waste of tens of billions in salaries.

4. The Fed juiced the economy with cheap money after 9/11, frightened by the slow recovery from the already-existing recession, plus the huge economic impact of terrorism. Mortgage rates were artificially low for a long time.

5. Community activists held hostage the banks which wanted to expand, extorting extravagant promises of liberal mortgages backed by hundreds of billions of dollars of commitments. Federal policies gave these activists, like ACORN, the power to object to bank expansion and acquistion plans.

6. Politicians crowed about expanding home ownership. Democrats mau-maued Republicans who objected that the housing market was inflated and that too many risky mortages were written, and that taxpayers were implicitly backing many risky mortgage operations like Fannie & Freddie.

7. Fannie and Freddie and many others rewarded officers with gigantic bonuses for writing more mortages.

8. The same insane policies and federal agencies are still in place. The federal government is writing something like 90% of all mortgages. Very few people recognize that the federal caused, indeed required, the extremely risky financial behavior.

Tom Sullivan of FL 12:15PM June 02, 2011