Giving two minutes to the bubonic plague in an hourlong documentary about the deadliest medieval epidemics: with such consistent media messaging, is it any wonder that most people are still confused about the real causes of the crisis?

Five years of financial denial

By Jay W. Richards

Washington’s role in the housing crisis still hasn’t hit home

We’re nearing the fifth anniversary of the 2008 financial crisis boil-over, but Washington is still in denial about its role in the meltdown. The numbers, which weren’t well known in 2008, now tell the real story.
As a result of Washington’s arduous efforts to expand homeownership for lower-income Americans, by 2008 almost half the loans in the market — some 27 million — were risky, subprime or otherwise nontraditional. Two-thirds of these risky loans were held by entities controlled by or within the federal government. Fannie Mae and Freddie Mac held almost half — 12 million. So it’s no surprise that these “government-sponsored” behemoths that buy home loans from loan originators had to be nationalized in September 2008 at the height of the financial crisis.

The Federal Housing Administration and other federal agencies, such as the Veterans Administration and Federal Home Loan Banks, held 5 million, and Community Reinvestment Act and Department of Housing and Urban Development programs had another 2.2 million. That’s a whopping total of 19.2 million risky loans held by government or government-controlled actors, leaving 7.8 million for Countrywide Financial, Wall Street and so forth.

Superficially, it might appear that things have changed. If you’ve tried to buy a house in the past few years, for instance, you know that it’s now harder to get a large loan than it was before the crisis. And President Obama recently proposed that the federal government begin to wind down Fannie Mae and Freddie Mac.

Both of these facts look like evidence that the federal government has disentangled itself from housing. However, the visible hand of government is still manipulating the market. Indeed, Fannie, Freddie and the Federal Housing Administration now backstop 87 percent of all home loans, up from about 40 percent before the crisis.
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