New York Mayor Mike Bloomberg raised eyebrows this week by claiming that the big banks didn’t cause the mortgage crisis.
According to Mayor Mike, the real culprit was Congress for forcing poor innocent banks to give mortgages to people who couldn’t afford them.
It has become a standard conservative talking point to blame Fannie Mae and Freddie Mac for the mortgage crisis. However, as Pat Garafalo of Think Progress notes, Federal Reserve data show that:
- More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
- Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
Congress did not force the banks into an orgy of speculative lending and securitization. The banks made bad loans and packaged them into bad securities and sold them to suckers because it was massively profitable. Until it wasn’t.
If you really want to blame Congress, blame legislators for deregulating the financial industry and allowing it to run amuck so spectacularly.
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