Video: Get the Government Out of the Housing Market
Real estate professionals know firsthand the dangers of government intervention in the housing market. The housing bubble and subsequent collapse of the financial markets in 2008 was in part caused by government efforts to artificially expand home ownership regardless of the financial risk. Government-sponsored enterprises like Fannie Mae and Freddie Mac, along with FHA “affordable” housing efforts artificially expanded homeownership to unsustainable levels. From 1990 to 2003, Fannie and Freddie went from holding 5 percent of the nation’s mortgages to over 20 percent. By 2008, Fannie and Freddie held an astonishing amount of debt at nearly $8 trillion. Once homeowners started defaulting on their monthly payments at above average rates, it became clear Fannie and Freddie would collapse. Many low-income and first time home buyers lost their homes while Fannie and Freddie were eventually bailed out by U.S. taxpayers to the tune of $200 billion.
Many politicians and pundits at the time, and still today, blame greedy Wall Street bankers for the crisis. So in 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act under the guise of protecting consumers and punishing Wall Street. But instead of addressing the root cause, bad government policy, Dodd-Frank empowered the very regulatory establishment which created the environment that led to the financial crisis in the first place. Dodd-Frank imposes thousands pages of new rules and regulations on the financial industry, codifies “too big to fail”, harms local community banks, restricts access to credit for investors and homebuyers, raises lending costs, reduces access to capital for small businesses, and has created one of the most powerful and unaccountable federal agencies — the Consumer Financial Protection Bureau (CFPB). Dodd-Frank is one of the major factors responsible for the country’s historically slow economic recovery. Congress must act quickly and decisively to get rid of Dodd-Frank and help get our economy going again.
Watch the video above to learn more about what caused the economic crisis of 2008, how the government’s response was entirely misguided, and what Congress should do to fix it. This panel features Heritage Foundation scholars Norbert Michel and Diane Katz, along with Cato Institute scholar Mark Calabria.