Bush’s fault or is it? Bush can take credit for letting the spending and debt get out of control but how much did he actually have to do with the economic collapse? One of the reasons for the collapse was the prolonged housing crisis. Much is made of the bad mortgages paid out by banks, but little mention is made of the Fannie Mae and Freddie Mac catapult which slammed directly into the housing bubble and blew it up.
A housing bubble is a run-up in housing prices fueled by demand and speculation. It’s based on prior history. Speculators in particular see it as a source of making easy money. At some point, the demand dwindles or ceases and the bubble bursts. Our housing market was artificially fueled by easy money provided by banks who were loaning indiscriminately. So how do Fannie and Freddie fit in?
During the Clinton Administration, Fannie and Freddie were made to give loans and mortgages to people who could ill-afford them. Banks were convinced to follow, often being bullied by groups such as ACORN. Chris Dodd, Senate Banking Committee, and Barney Frank, House Financial Services Committee, insisted that Fannie and Freddie issue more than 30% of their mortgages to people with incomes below the standard acceptable income. The requirement was eventually increased to 50%. These powerful Democrats then convinced the Republicans to go along with it or they would be subject to retaliation by the poor and minorities. Chris Dodd is also notorious for taking favors from the Countrywide Mortgage Company which crashed due to the subprime mortgage crisis, which played a major role in the collapse.
Fannie and Freddie, which we have bailed out repeatedly and continue to bail out, helped cause the meltdown and continue to loan to people who will not be able to pay the bill, pushing us towards yet another housing collapse.
Whether banks were forced or did it to make money is subject to review. It’s very possible it was a combination of the two.