The Makings of a Downfall Research Paper

The Makings of a Downfall
An analysis of the causes of the 2008 sub-prime mortgage crisis.
# 154207 | 1,216 words | 7 sources | 2015 | US
Published on Aug 31, 2015 in Business (Finance, Investment and Banking) , Business (General) , Ethics (General)

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From the Paper:

"Political influence on private corporations is hardly a new concept. This political influence is particularly evident and problematic, however, in the case of Fannie Mae and Freddie Mac. Because these organizations are Government Sponsored Enterprises (GSEs), they explore an entirely different realm of these partisan pressures.
"Attempts at mediating the surmounting catastrophe were ill-received and spun in a negative light. Any suggestion of reforming the policies in place resulted in immediate political backlash. Law- makers would face an onslaught of calls and letters from those concerned that the government was in opposition of continued offers for affordable housing for low-income households. In hindsight, it isn't difficult to notice the political move underlying this idea.
"The HUD was responsible for setting quotas concerning the proportion of low-income mortgages held by Fannie Mae and Freddie Mac. This committee, however, carried an air of political clout that proved detrimental to the interests of the taxpayers. In attempts to win the support of the public, both Republican and Democratic administrations proceeded to push this quota to its limits. With the continued pressure from Congress to increase the amount of sub-prime mortgages purchased, Fannie Mae and Freddie Mac were pushed to delve continually deeper into unchartered territories. Reports state that the GSEs' knowledge regarding these securities was limited and this lack of information and experience began to build quickly. The organizations were unable to let up on their share in this market due to continually increasing pressure from Congress and the White House. Then-assistant secretary of HUD remarked that Fannie Mae and Freddie Mac were "behind" other private institutions and that the only way to catch up and remain relevant is buying larger quantities of sub-prime loans."

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