Washington and the Financial Crisis

You won't find this from the Associated Press.

Reuters blogger James Pethokoukis says, "Yes, Washington did help cause the financial crisis"

There are, to be sure, lots of villains to blame for America’s financial crisis: regulators, Wall Street executives, credit ratings agencies, Alan Greenspan.

But the one baddie Washington doesn’t want to touch is, well, Washington. Its crime: pushing federal policies that favored ever-increasing home ownership, particularly from the mid-1990s on, and thus helping spawn the housing bubble at the center of the devastating meltdown. (We’ll focus on its legacy of financial bailouts another time.)

The sheer scope of the bipartisan, federal pro-housing undertaking is mind-boggling.

As Jeffrey Miron, a Harvard University economist, noted in testimony this week to the House Financial Services Committee, a list of past and ongoing efforts would include the Federal Housing Administration, Federal Home Loan Banks, Fannie Mae, Freddie Mac, the Community Reinvestment Act, the deductibility of mortgage interest, the tax-favored treatment of capital gains on housing, the HOPE for Homeowners Act and the $8000 homebuyer tax credit.

Then, of course, there are the Federal Reserve’s efforts to bring down mortgage rates.

And,

But while Washington is creating financial regulations and regulators, going after banker pay and questioning the role of the ratings firms, it seems intent on leaving its pro-housing policy bias intact.

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Wikipedia entry for the Community Reinvestment Act (original) and the changes since.

No one asks, If there is a financial crisis, why would Democrats want to expand the role of the Federal government in health care? They've already shown they were unable or unwilling to regulate A)Banks; B) Financial markets; or C) Fannie Mae or Freddie Mac.