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How did we get into this financial mess?

January 26, 2009 By Richard C. Young

By Lawrence H. White

Cato’s paper is the best I’ve read on the subject and I quote for you below from the paper’s executive summary. As a housekeeping note, I disclose to you that I am an enthusiastic benefactor of Cato.

Dick Young

Executive Summary

1. The explosion in risky mortgages to under qualified borrowers was encouraged by the federal government.

2. The growth of “creative” nonprime lending follows Congress’ strengthening of the Community Reinvestment Act, the Federal Housing Administration’s loosening of down-payment standards, and the Department of Housing and Urban Development’s pressuring lenders to extend mortgages to borrowers who previously would not have qualified.

3. Freddie Mac and Fannie Mae grew to own or guarantee about half of the United State’s $12 trillion mortgage market.

4. The credit that fueled these risky mortgages was provided by the cheap money policy of the Federal Reserve.

Read the full article here>>

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Richard C. Young
Richard C. Young is the editor of Young's World Money Forecast, and a contributing editor to both Richardcyoung.com and Youngresearch.com.
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