There is no mystery where the Occupy Wall Street movement came from: It is an offspring of the same false narrative about the causes of the financial crisis that exculpated the government and brought us the Dodd-Frank Act. According to this story, the financial crisis and ensuing deep recession was caused by a reckless private sector driven by greed and insufficiently regulated. It is no wonder that people who hear this tale repeated endlessly in the media turn on Wall Street to express their frustration with the current conditions in the economy.
Their anger should be directed at those who developed and supported the federal government's housing policies that were responsible for the financial crisis.
Beginning in 1992, the government required Fannie Mae and Freddie Mac to direct a substantial portion of their mortgage financing to borrowers who were at or below the median income in their communities.
The Federal Housing Administration was competing with Fannie and Freddie for the same mortgages. And thanks to rules adopted in 1995 under the Community Reinvestment Act, regulated banks as well as savings and loan associations had to make a certain number of loans to borrowers who were at or below 80% of the median income in the areas they served.
Research by Edward Pinto, a former chief credit officer of Fannie Mae (now a colleague of mine at the American Enterprise Institute) has shown that 27 million loans—half of all mortgages in the U.S.—were subprime or otherwise weak by 2008. That is, the loans were made to borrowers with blemished credit, or were loans with no or low down payments, no documentation, or required only interest payments.
Of these, over 70% were held or guaranteed by Fannie and Freddie or some other government agency or government-regulated institution. Thus it is clear where the demand for these deficient mortgages came from.
The huge government investment in subprime mortgages achieved its purpose. Home ownership in the U.S. increased to 69% from 65% (where it had been for 30 years). But it also led to the biggest housing bubble in American history.
The gov't FORCED banks to write bad loans, then the banks started bundling to protect themselves from the bad loans they were FORCED to make. This is what caused our financial crisis: GOVERNMENT!
Michelle Bachmann hit on this the recent debate. All Repubs should be following her lead and exposing the lie the left has been spewing that it all just corporate greed. When it began with gov't corrupting our financial system and then covered it up and defended it.