Ownership of houses has been raised to an iconic level not recently but for many decades. The Federal Housing Authority made its debut as long ago as 1934. Fannie Mae entered the stage in 1938. It was the iconic status of home ownership that led to the housing hysteria

Following the World War II small loans were advanced to veterans to enable them to purchase their first nests. For many decades the saving and loans sector existed only to grant loans to those who bought homes. In exchange the government offered some advantages to the agency that banks did not enjoy. The mortgaged-backed-securities came into focus in the 80’s allowing for securitization of the mortgages. For this a handful of laws had to be passed which the Congress obliged most happily.

All the presidents irrespective of whether they were Democrats or Republicans spoke loudly about the values of ownership of homes for all citizens. Bill Clinton set up goals in specific numbers and the goals of Fannie Mae and Freddie Mac for implementing plans for affordable housing greatly increased. These goals were attempted to be enforced during the presidency of George Bush. Anybody opposing the goals of Fannie Mae and Freddie Mac were accused of being “anti-homeownership.”

The conservatives are viewing the goals set out for Fannie Mae and Freddie Mac as the main reason for the financial crisis. Peter Wallison of American Enterprise Institute said, “In order to increase homeownership, Fannie and Freddie were required to decrease their standards.” He is a leading critic of these two entities. He added, “We made a big mistake in trying to force housing on to a population that couldn’t afford housing.”

This view is not fully correct. It is true people who had no chance of paying back loans were granted it. It was an insane step. But the goals of Fannie and Freddie were not the prime culprits. It was the mushrooming of sub-prime lenders who had developed the skill of getting even the most toxic loan securitized by Wall Street that can be considered to be the prime suspect. The standards of Fannie and Freddie were lowered largely because they were losing a share of the market to the originators of sub-prime loans.

Now the question arises if the policies undertaken by the government make sub-prime lending easy? Yes definitely. The federal government slowly made regulations lax and by placing caps on interest first made it possible and then allowed it to zoom. The idea was that sub-prime lending would promote home ownership.

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