According to Pinto’s AEI colleague Peter Wallison, by 2008, “almost 50% of loans…were subprime…and two thirds of them were held by government agencies or firms required to buy them by government regulations.”
In the short run, these government directives relaxing lending standards to promote home ownership were wildly successful. Home ownership rates climbed to record levels.
Of course, HUD, Fannie, and Freddie could push all this because the assumption lurking behind it all was that if it collapsed, U.S. taxpayers were there to pick up the tab.
Hey, government bureaucrats actually got something right.
Now we are left cleaning up the mess and picking up the pieces. But a tragic and ironic footnote is that black Americans, whose interests community activist groups who lobbied for all this were supposedly representing, have taken the brunt.
Black’s, whose home ownership rates skyrocketed during the government stoked boom, now have foreclosure rates twice that of whites. And, of course, black unemployment in this economic slowdown following the collapse is double that of whites.
If there was a moment of doubt that most Americans were going to buy into the government plantation lie, this last election should clear things up.
But this election also tells us we still have a divided country and many who bought the big government lie in the past still aren’t getting it.
We’ve got a lot of work to do.