The Housing Crisis

Everyone agrees that the cause of the housing crisis was sub prime loans (loans given to those who cannot afford them). This is not the issue. The issue is that most of America seems to be suffering under the delusion that these loans were given as a result of under regulation: this thought is the result of under education, and this post is here to set the facts straight.

This problem occurred because of OVER (not under) regulation of the market.

What a silly sounding claim, you're saying to yourself: this goes against everything that you have been told up to this point with regards to the housing crisis. How can I make a claim like this?

The answer: very easily. This entire problem was a direct result of a bill called the Community Reinvestment Act which was expanded in 1995 by Clinton (D) to require banks to give sub prime loans.

Why have you not heard of this before? Well for a very simple reason: it is generally pointed out (and this is correct) that a majority of the sub prime loans which caused this crisis were not ones which fell under the umbrella of the CRA, they were other sub prime loans which were not required but were put in place anyway. Why was this done? Simple: it was profitable. That much they have correct, a lot of the loans were given because it was profitable to reclaim the house when the loans were defaulted on and sell it at a higher price: housing prices kept going up, so it was a pretty safe investment (or so it was thought). The thing people keep missing, though, is that even the loans which were not directly required by the CRA were caused by the CRA. The bill was intended to help the poor get housing: obviously if they had been giving out sub prime loans in the first place, the bill would have been unnecessary. But they werent, because it wasnt profitable. It became profitable after the implementation and execution of this bill because when more people could get loans, more people would buy houses. This increased the demand for housing, meaning that housing prices went up, meaning that it became profitable to give these loans because the reclaimed house was worth more than the loan. This led to more loans being given, more houses being bought, more profit, and more loans. Then the bubble popped, and we ended up with our current economic crisis.

So yes, businesses did to it for profit most recently, but the room for profit as well as the original problem was created by a bill started by Democrats and expanded by Democrats as a way of helping the poor afford housing. Every time the government tries to "help the poor", it is the poor who get shortchanged.