Deregulation Created the Subprime Mortgage Crisis

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Deregulation Created the Subprime Mortgage Crisis The mid-1990s saw an economic revival. What incited this activity was a technology boom like no other. It created a new era of electronics and computing. There were cell phones, desktop and laptop computers, the Internet, electronic games, flat panel TVs and major advances in business software and efficiencies. The housing industry was a big benefactor of this new economy. Home prices began to rise again by 1996. The rate of home ownership during the 1970s, 1980s and the first half of the 1990s averaged 64.4 percent. The rate began to rise in 1995, peaking at 69.2 percent in 2004. New housing rebounded. The economic turnaround brought California -- hit especially hard by the last…show more content…
As reported by the Washington Post’s Robert O 'Harrow Jr. and Brady Dennis in an article titled, ‘The Beautiful Machine’, “Financial Products unleashed techniques that others on Wall Street rushed to emulate, creating vast, interlocking deals that bound together financial institutions in ways that no one fully understood and contributed to the demise of its parent company (AIG) as a private enterprise…many of the most compelling aspects of the economic cataclysm can be seen through the story of AIG and its Financial Products unit: the failure of credit-rating firms, the absence of meaningful federal regulation, the mistaken belief that private contracts did not pose systemic risk, the veneration of computer models and quantitative analysis.” However, a November 13, 2009 column by Edward Pinto in the Wall Street Journal blames Congress and affordable housing programs, “Congress 's goal was to force these two government-sponsored enterprises (GSEs Fannie Mae and Freddie Mac) to purchase loans that had been originated by banks -- loans that were made under the pressure of another federal law, the 1977 Community Reinvestment Act (CRA), to increase lending in low- and moderate-income communities...from 1977 to 1991, $9 billion in local CRA lending commitments had

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