The Housing Crisis ECO201 Week 2 Discussion Question

The Housing Crisis ECO201 Week 2 Discussion Question - The...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
The Housing Crisis The mortgage crisis can be laid directly on the doorstep of the government. Amendments in the mid-90s to the Community Reinvestment Act of 1977 required private lenders to loosen credit restrictions. Repeal of the Glass- Steagall Act (the Banking Act of 1933) with the Gramm-Leach-Bliley Act in 1999 deregulated the industry, and allowed banking firms and securities firms to merge. Lobbying by Community groups like ACORN pressured Congress into directing Fannie and Freddie to loosen credit standards. (Kuttner, 2007) The Commodities Modernization Act of 2000 allowed mortgage backed securities to be traded. The use of Credit Default Swaps (CDS), essentially a insurance premium in the form of a derivative that says Party A will pay Party B if Party C defaults, increased 100 fold from 1998 til 2008. Former President Bill Clinton and former FED Chairman Alan Greenspan have said on tape that they did not properly regulate derivatives and CDS. (Figlewski, Smith, & Walter, 2008)
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

The Housing Crisis ECO201 Week 2 Discussion Question - The...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online