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Stan Liebowitz concludes that the chief culprit in today’s mortgage-market meltdown is government [2]. Here’s a key paragraph from the Executive Summary:
This report concludes that, in an attempt to increase home ownership,
particularly by minorities and the less affluent, virtually every
branch of the government undertook an attack on underwriting standards
starting in the early 1990s. Regulators, academic specialists, GSEs,
and housing activists universally praised the decline in
mortgage-underwriting standards as an “innovation” in mortgage lending.
This weakening of underwriting standards succeeded in increasing home
ownership and also the price of housing, helping to lead to a housing
price bubble. The price bubble, along with relaxed lending standards,
allowed speculators to purchase homes without putting their own money
at risk.