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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.



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 AnalysisA 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 AnalysisA 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 analysisGive 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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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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Pollock, Alex shuffle 80

Fannie and Freddie have already become part of the government.

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Government Testimony logo 80

We are in the midst of a serious financial crisis, and there is a temptation to act precipitously, without thinking of the long-term consequences.

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The five areas to guide long-term reforms are: 1) government policies to subsidize affordable housing, 2) rules defining the limits of safety net protection , 3) policies governing financial institution consolidation and competition, 4) prudential regulation and supervision, and 5) rules ensuring transparency in financial transactions and positions.

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