Wall Street's gullible occupiers
The protesters have been sold a bill of goods. Reckless government policies, not private greed, brought about the housing bubble and resulting financial crisis

Flickr/_PaulS_

Wall Street Protest March, September 26th, 2011, Wall Street, Financial District, New York

There is no mystery where the Occupy Wall Street movement came from: It is an offspring of the same false narrative about the causes of the financial crisis that exculpated the government and brought us the Dodd-Frank Act. According to this story, the financial crisis and ensuing deep recession was caused by a reckless private sector driven by greed and insufficiently regulated. It is no wonder that people who hear this tale repeated endlessly in the media turn on Wall Street to express their frustration with the current conditions in the economy.

Read Peter Wallison's related outlook, "The Error at the Heart of the Dodd-Frank Act"

Their anger should be directed at those who developed and supported the federal government's housing policies that were responsible for the financial crisis.

Beginning in 1992, the government required Fannie Mae and Freddie Mac to direct a substantial portion of their mortgage financing to borrowers who were at or below the median income in their communities. The original legislative quota was 30%. But the Department of Housing and Urban Development was given authority to adjust it, and through the Bill Clinton and George W. Bush administrations HUD raised the quota to 50% by 2000 and 55% by 2007.

Related video: Taking the Government Out of Housing Finance

This article is available in full by subscription to the Wall Street Journal. The full text will be posted to AEI.org on Monday, October 17

Peter J. Wallison is the Arthur F. Burns Fellow in financial policy studies at AEI.

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