The Subprime Cover-Up

Investor's Business Daily
March 4, 2010
P. A13

There are concerns about University of California-Berkeley economist Dwight Jaffee's recent studies about the role housing policy played in the financial crisis, which were commissioned by the bipartisan Financial Crisis Inquiry Commission to be used as a baseline for discussion and findings as Congress develops new banking rules. Jaffee says incentives under the Community Reinvestment Act played no role in the subprime mortgage crisis, but critics say he fails to address government campaigns to increase minority homeownership rates and the subsequent codifying of "flexible lending" as part of new CRA mandates. Additionally, Jaffee says affordable-housing goals imposed on Fannie Mae and Freddie Mac by HUD played no role in the housing crisis because they were a "secondary priority" for the government-sponsored enterprises, but critics point out that the GSEs' executives insist that the housing goals prompted them to enter the subprime market.
Web Link