President Barack Obama's Health Speech

[_dartagnan]

http://www.dailykostv.com/w/002154/

Bill O'Reilly says he supports a public option!

Who else knew he was a "socialist"?

[_JohnStuartMill]

Mainly

1) Extremely cheap credit - fueled in part by the Fed's low prime rate and in part by overeager Chinese investment due to their high savings rate.

2) Investors having intense demand for mortgage backed securities because of the steady, high rate of return without properly assessing risk and/or using questionable financial instruments to hedge their risk leading to

3) This creating intense demand for housing loans that in turn completely crippled the banking industry's loan standards. There was no need for any standards due to the ability to turn a profit either by 1) selling the loan into a MBS or flipping the property for a profit due to the quickly rising prices. Give a loan to anybody = money for the people doing it at the moment. Of course, this lead to an unsustainable bubble that collapsed in a financial apocalypse, but the commissions were pretty sweet for a time.

Government programs that incentive banks to provide low-income housing loans were a very minor factor.

This This American Life episode explaining the matter has a much deserved reputation for being great:

http://www.thisamericanlife.org/Radio_E ... pisode=355

I don't know what's in that episode, but I'll add a few points that cast serious doubt on the hypothesis that Fannie/Freddie/the CRA are responsible for the housing crisis:

1. The majority of loans that proved to be bad were not originated by Fannie or Freddie, but rather by private lenders.

2. Even if Fannie and Freddie took a disproportionate number of bad mortgages (and remember that those loans actually overperformed), private lenders would not have followed them down the rabbit hole unless there was something seriously screwed up in their risk accounting, too.

3. Fannie and Freddie and the CRA have been around for too long (3-4 decades) for the recent crisis to be credibly attributed to their activities. A much more proximate -- and hence, plausible -- cause is the deregulation of securities markets at the end of the 1990s.

Interestingly, many of the people shouting that the housing crisis is the government's fault claim to be economic Austrians. But the deregulation explanation of the housing bubble actually conforms more closely to Austrian macroeconomic principles.