Lack of Regulation of ‘Shadow Banking System’ Caused Housing Crisis

Sloan School of Management

The continued narrative that the housing crisis was due to government programs that helped poor people is doubtful explains  researcher at the Sloan School of Management at MIT Antoinette Scholar. She says it isn’t what happened:

“A lot of the narrative of the financial crisis has been that this [loan] origination process was broken, and therefore a lot of marginal and unsustainable borrowers got access to funding. In our opinion, the facts don’t line up with this narrative. … Calling this crisis a subprime crisis is a misnomer. In fact, it was a prime crisis.”

CBS Moneywatch author Mark Thoma points to further evidence to argue against the idea that it was not :

“Government programs that helped low-income household purchases that let to the widespread defaults on the subprime loans they held sparking the entire financial meltdown.”

For more on this story from CBS Moneywatch click here.

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