The Government Mortgage Complex

What caused the 2008 financial crisis? The left’s immediate response to the crisis was to fasten all the blame on Wall Street and the private sector. The Dodd-Frank Act and the burdensome regulation it imposed on borrowers and the entire financial system was the result. Our view is that the financial crisis was primarily caused by government housing policy, particularly the government’s promotion of loose mortgage underwriting standards after the adoption of the affordable housing goals for Fannie Mae and Freddie Mac in 1992 and HUD’s National Homeownership Strategy in 1995. This webpage contains commentary by Edward J. PintoAlex J. Pollock, and Peter J. Wallison, AEI’s financial services experts, on this and other issues of financial regulation, as well as proposals for eliminating Fannie and Freddie as government sponsored enterprises and creating a predominantly private system of housing finance.



As illustrated above, flawed government policies were central to creating an unsustainable housing boom and ultimately the 2008 financial crisis.

How did the financial system accumulate an unprecedented number of risky mortgages? Learn more in this primer on the Government Mortgage Complex, “Government Housing Policy: The Sine Qua Non of the Financial Crisis,” by Edward J. Pinto.

View a more comprehensive timeline showing how government policies promoted loosened credit standards and led to the mortgage meltdown.

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Low-income and minority borrowers have suffered disproportionately from subprime lending


Eliminating leverage among homebuyers is a poor choice


New year, same advice


Edward J. Pinto’s Analysis
A Government-Mandated Housing Bubble, Peter J. Wallison, Edward J. Pinto| February 16, 2009

How the Government Is Creating Another Bubble, Peter J. Wallison, Edward J. Pinto | December 27, 2010

Taking the government out of housing finance: Principles for reforming the housing finance market, Peter J. Wallison, Alex J. Pollock, Edward J. Pinto | January 20, 2011

Government Housing Policies in the Lead-up to the Financial Crisis: A Forensic Study, Edward J. Pinto | February 05, 2011

Government Housing Policy: The Sine Qua Non of the Financial Crisis, Edward J. Pinto | September 14, 2011.

Why the left is losing the argument over the financial crisis, Peter J. Wallison, Edward J. Pinto | December 27, 2011

The hidden cost of free money, Peter J. Wallison, Edward J. Pinto | January 19, 2012

Free fall: How government policies brought down the housing market, Peter J. Wallison, Edward J. Pinto | April 26, 2012

How could FHA have contributed to the housing bust? Edward J. Pinto | February 14, 2013

New Qualified Mortgage Rule Setting Us Up for another Meltdown, Peter J. Wallison, Edward J. Pinto | March 3, 2013

Alex J. Pollock’s Analysis
A Plan for Fannie and Freddie (previously The GSE Risk Turkey Comes Home to Roost), Alex J. Pollock | July 22, 2008

The Future of Fannie and Freddie, Alex J. Pollock | February 13, 2009

Ten Ways to Do Better in the Next Financial Cycle, Alex J. Pollock | July 28, 2009

Why Canada Avoided a Mortgage Meltdown, Alex J. Pollock | March 19, 2010

Fix Double Leverage Problem, Alex J. Pollock | July 10, 2010

Fan and Fred: What Would Andrew Jackson Do? Alex J. Pollock | July 23, 2010

To Overhaul the GSEs, Divide Them into Three Parts (previously Fannie and Freddie In Partes Tres), Alex J. Pollock | August 26, 2010

A Dozen Ideas: What to Do about Fannie and Freddie, Alex J. Pollock | February 21, 2011

On Housing, There Will Be More Lean Years Ahead, Alex J. Pollock | May 12, 2011

GSE Debt Growth Leaves US Taxpayers Exposed, Alex J. Pollock | June 20, 2011

The Bubbles, Busts, and Bailouts are Doomed to Repeat, Alex J. Pollock | June 23, 2011

The Government’s Four-Decade Financial Experiment (previously The Explosion in the Government’s Off-Balance Sheet Debt) Alex J. Pollock | July 13, 2011

In The Wake Of The Bubble, Alex J. Pollock | October 2011

The Shakespearian Tragedy of Fannie Mae, Alex J. Pollock | October 26, 2012

The Financial Stability Oversight Council’s Fatal Flaw, Alex J. Pollock | October 27, 2012

Peter J. Wallison’s analysis
Give Us Disclosure, Not Audits, Peter J. Wallison | June 2, 2003

The Case for Privatizing Fannie Mae and Freddie Mac Grows Stronger, Peter J. Wallison | May 1, 2004

Refinancing the Future, Peter J. Wallison | April 2, 2005

Regulating Fannie Mae and Freddie Mac, Peter J. Wallison | May 13, 2005

Capital Punishment, Peter J. Wallison | November 4, 2006

Only Skin Deep: The Rudman Report Scratches the Surface, Peter J. Wallison | April 2006.

Moral Hazard on Steroids, Peter J. Wallison | June 23, 2006

Facing Facts on Fannie and Freddie, Peter J. Wallison | September 15, 2006

Don’t Bail Out Fannie and Freddie, Peter J. Wallison | November 29, 2007

Private Profits, Public Risks, Peter J. Wallison | March 20, 2008

Dangerous Dithering: Congressional Inaction Plants the Seeds of Crisis, Peter J. Wallison | March 28, 2008

Fair Value Accounting, Peter J. Wallison | July 2008

Playing Politics with Financial Security, Peter J. Wallison | July 2, 2008

There is No Reason to Panic, Peter J. Wallison | July 14, 2008

Fannie and Freddie by Twilight, Peter J. Wallison | August 26, 2008

Relief for Mark-to-Market Accounting, Peter J. Wallison | November 5, 2008

A ‘Failed Business Model’, Peter J. Wallison | September 8, 2008

How Paulson Would Save Fannie Mae, Peter J. Wallison | September 12, 2008

Blame Fannie Mae and Congress For the Credit Mess, Peter J. Wallison, Charles W. Calomiris | September 23, 2008

Deregulation Not to Blame for Financial Woes, Peter J. Wallison | September 30, 2008

The Last Trillion-Dollar Commitment, Peter J. Wallison, Charles W. Calomiris | September 30, 2008

Systemic Risk and the Financial Crisis, Peter J. Wallison | October 2008

Obama Voted ‘Present’ on Mortgage Reform, Peter J. Wallison | October 15, 2008

Let’s Use Fannie to Clear Up the Mess It Made, Peter J. Wallison | October 25, 2008

Worse Than You Think, Peter J. Wallison, Edward J. Pinto | November 3, 2008

Not Everything Can Be Too Big To Fail, Peter J. Wallison | November 22, 2008

Cause and Effect, Peter J. Wallison | November 25, 2008

What Got Us Here? Peter J. Wallison |December 9, 2008

Everything you wanted to know about credit default swaps-but were never told, Peter J. Wallison | December 31, 2008

A Government-Mandated Housing Bubble, Peter J. Wallison, Edward Pinto | February 16, 2009

Risky Business, Peter J. Wallison |February 24, 2009

How Geithner Can Price Troubled Assets, Peter J. Wallison | February 26, 2009

The True Origins of This Financial Crisis, Peter J. Wallison | February 2009

Congress is the Real Systemic Risk, Peter J. Wallison | March 17, 2009

New Plan, Old Fears, Peter J. Wallison | March 24, 2009

The ‘Big Lie’ Defense, Peter J. Wallison | April 2, 2012

Reinventing GSEs: Treasury’s Plan for Financial Restructuring, Peter J. Wallison | April 13, 2009

Barney Frank Backs Off, Peter J. Wallison | May 5, 2009

Credit-Default Swaps Are Not to Blame, Peter J. Wallison | June 1, 2009

Too Big to Fail, or Succeed, Peter J. Wallison | June 19, 2009

Unfree to Choose, Peter J. Wallison | July 9, 2009

Do We Need a Consumer Financial Protection Agency? Peter J. Wallison, Alex J. Pollock | July 27, 2009

Unnecessary Intervention: The Administration’s Effort to Regulate Credit Default Swaps, Peter J. Wallison | August 28, 2009

The Fed Can’t Monitor ‘Systemic Risk’, Peter J. Wallison | September 9, 2009

TARP Baby, Peter J. Wallison | September 30, 2009

Barney Frank, Predatory Lender, Peter J. Wallison | October 16, 2009

The Permanent TARP, Peter J. Wallison | November 16, 2009

Did the ‘Repeal’ of Glass-Steagall Have Any Role in the Financial Crisis? Not Guilty; Not Even Close, Peter J. Wallison | November 2009

Lack of Candor and the AIG Bailout, Peter J. Wallison | November 27, 2009

Not a Failure of Capitalism – A Failure of Government, Peter J. Wallison | December 2, 2009

The Price For Fannie and Freddie Keeps Going Up, Peter J. Wallison | December 29, 2009

The President’s Bank Reforms Don’t Add Up, Peter J. Wallison | January 24, 2010

The Dead Shall be Raised: The Future of Fannie and Freddie, Peter J. Wallison | February 12, 2010

The Troubling Resolution Revolution, Peter J. Wallison | February 25, 2010

If You Liked Fannie and Freddie, Peter J. Wallison | March 18, 2010

The Dodd Bill: Bailouts Forever, Peter J. Wallison, David Skeel | April 7, 2010

Fannie and Freddie Amnesia, Peter J. Wallison | April 20, 2010

Crisis and Ideology: The Administration’s Financial Reform Legislation, Peter J. Wallison | April 22, 2010

Taxpayers and the Dodd Bill, Peter J. Wallison | April 26, 2010

Missing the Point: Lessons from The Big Short, Peter J. Wallison | June 30, 2010

When Economic Policy Became Social Policy, Peter J. Wallison | August 21, 2010

Going Cold Turkey, Peter J. Wallison | September 2010

How to Get Housing Off Government’s Juice, Peter J. Wallison | September 23, 2010

How the Government is Creating Another Housing Bubble, Peter J. Wallison, Edward Pinto | November 30, 2010

Barney Frank Still Doesn’t Get It, Peter J. Wallison | October 27, 2010

Slaughter of the Innocents, Peter J. Wallison |November 8, 2010

Moving Beyond Fannie and Freddie, Peter J. Wallison | January 3, 2011

Dissent from the Majority Report of the Financial Crisis Inquiry Commission, Peter J. Wallison | January 26, 2011

Eliminating the GSEs as Part of Comprehensive Housing Finance Reform, Peter J. Wallison | January 27, 2011

Follow the Weak Mortgage, Peter J. Wallison | January 28, 2011

What’s So Special About the 30-Year Mortgage, Peter J. Wallison |  February 1, 2011

The Lost Cause: The Failure of the Financial Crisis Inquiry Commission, Peter Wallison | February 10, 2011

A Way Forward for the Mortgage Market, Peter J. Wallison | February 15, 2011

Will (Should) Dodd-Frank Survive? Peter J. Wallison | March 1, 2011

Dodd-Frank’s Threat to Financial Stability, Peter J. Wallison | March 25, 2011

End It, Don’t Mend It, Peter J. Wallison | April 5, 2011

Roots of Crisis Buried Deep After Inquiry, Peter J. Wallison | April 14, 2011

Government Mortgage Guarantees Are Unnecessary, Peter J. Wallison | April 21, 2011

The Fed vs. the FDIC on Lehman’s Failure, Peter J. Wallison | April 27, 2011

Dodd-Frank and Housing Finance Reform, Peter J. Wallison | May 5, 2011

The True Story of the Financial Crisis, Peter J. Wallison | May 13, 2011

Fan and Fred: A Bad GOP Sequel, Peter J. Wallison | June 7, 2011

An “Unusual” Mortgage Coalition Reassembles, Peter J. Wallison | June 8, 2011

Government-Sponsored Meltdown, Peter J. Wallison | July 12, 2011

Repeal the Democrats’ Complex and Expensive Legislation, Peter J. Wallison | July 19, 2011

The Error at the Heart of the Dodd-Frank Act, Peter J. Wallison | September 2011

Wall Street’s Gullible Occupiers, Peter J. Wallison | October 12, 2011

Three Narratives about the Financial Crisis, Peter J. Wallison | October 28, 2011

Opposing View: Fannie, Freddie Caused the Financial Crisis, Peter J. Wallison | November 24, 2011

Volcker Rule is stuck in a Bygone Era, Peter J. Wallison | November 10, 2011

Magical Thinking: The Latest Regulation from the Financial Stability Oversight Council, Peter J. Wallison | November 15, 2011

How Regulators Herded Banks Into Trouble, Peter J. Wallison | December 3, 2011

Hey, Barney Frank: The Government Did Cause the Housing Crisis, Peter J. Wallison | December 13, 2011

Where No Mortgage News is Fit to Print, Peter J. Wallison | December 20, 2011

Why the Left is Losing the Argument over the Financial Crisis, Peter J. Wallison, Edward Pinto | December 27, 2011

Bet the House: Why the FHA is Going (for) Broke, Peter J. Wallison, Edward J. Pinto | January 19, 2012

Dodd-Frank and the Myth of ‘Interconnectedness’, Peter J. Wallison | February 10, 2012

A New Housing Finance System for the United States, Peter J. Wallison | March 1, 2012

Dodd-Frank’s Too-Big-to-Fail Dystopia, Peter J. Wallison | March 24, 2012

The Volcker Rule is Fatally Flawed, Peter J. Wallison | April 10, 2012

Free Fall: How Government Brought Down the Housing Market, Peter J. Wallison | April 26, 2012

Opposing View: An Out-of-Proportion Outcry, Peter J. Wallison | May 14, 2012

The Volcker Rule would not Have Prevented JP Morgan Chas’s $2 Bill Loss, Peter J. Wallison | May 15, 2012

Repeal Volcker, It Wouldn’t Have Saved the Whale, Peter J. Wallison | May 16, 2012

Does Shadow Banking Require Regulation? Peter J. Wallison | June 14, 2012

SIFI Designation Will Change Nature of Competitive Financial System, Peter J. Wallison | June 29, 2012

Is the Financial System Stable Without Regulation, Peter J. Wallison | July 18, 2012

Too Big to Fail Has Become a Permanent Bailout Program, Peter J. Wallison, Cornelius Hurley | August 14, 2012

Five Myths About Glass-Steagall, Peter J. Wallison | August 16, 2012

Treasury Revision of Fan/Fred Payments Seals Their Fate, Peter J. Wallison | August 22, 2012

The Bush Hangover, Peter J. Wallison | September 24, 2012

Too Big to Ignore, Peter J. Wallison | October 2012

Dodd-Frank and Too Big to Fail Receive Too Little Attention, Peter J. Wallison | November 1, 2012

Dodd-Frank Makes Future Taxpayer Bailouts More Likely, Peter J. Wallison | November 4, 2012

Too big to ignore: The future of bailouts and Dodd-Frank after the 2012 election, Peter J. Wallison | October 24, 2012

How to Repeat the Mortgage Mess, Peter J. Wallison | March 7, 2013

Faux Outrage Over ‘Too Big to Jail’, Peter J. Wallison | March 11, 2013

The Corker-Warner housing reform won’t work, Peter J. Wallison | July 1, 2013

Competing visions for the future of housing finance, Peter J. Wallison | August 11, 2013

Latest Content

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Primarily due to a reliance on low-down-payment, 30-year mortgages and other highly leveraged lending, our affordable homeownership policies have failed to achieve two primary goals – broadening homeownership and achieving wealth accumulation for low- and middle-income homeowners.

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Earning a sub-median salary and consequently living in a sub-median apartment isn’t something that makes DC unlivable. It’s almost a definitional matter.

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Kevin Corinth considers the evidence from a new study and concludes that the homeless need immediate relief as well as solutions that provide real opportunity.

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Housing policy needs to be refocused on strengthening household balance sheets, especially by making borrowers more resilient to home price declines. The new Wealth Building Home Loan developed at the American Enterprise Institute does exactly that.

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Created by AEI’s Edward Pinto and Stephen Oliner, the Wealth Building Home Loan is a new approach to low-income home finance that provides low-income borrowers a straight, broad highway to building wealth based on a 15-year, fully amortizing, fixed-rate loan.


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By politicizing the allocation of mortgage credit beyond the level that was possible with Freddie and Fannie, the bill proposed by Sen. Tim Johnson and Sen. Mike Crapo manages to make the affordable-housing provisions of current policy worse.


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Government policies promoted a systematic loosening of underwriting standards in an effort to promote affordable housing, which then contributed mightily to the housing bubble, mortgage meltdown and resulting financial crisis.  

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Low mortgage underwriting standards were partially responsible for the collapse of the housing market. Now that standards have been raised to prevent another collapse, there are calls to bring them back down again.

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Barney Frank Backs Off

It may be a good sign that Barney Frank is deferring action on a plan to create a government agency to resolve “systemically important” failing financial institutions.

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Wallison, Peter shuffle 80

Is the current crisis the result of a failure of capitalism or a failure of government policy?

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