Private Sector Sparked Subprime Crisis: Fed

Liberal housing policy wasn't at fault—risky betting was
By Gabriel Winant,  Newser User
Posted Oct 12, 2008 9:12 PM CDT
A customer leaves a branch of Chase Bank on Wednesday, Jan. 16, 2008 in New York.   (AP Photo/Mark Lennihan)
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(Newser) – A talk radio campaign blaming the credit crisis on lower-class Americans is up against new federal data, McClatchy reports. Critics argue that government-backed Fannie Mae and Freddie Mac, pushed by Clinton policies, gave subprime mortgages to minority Americans who could not afford homes. But 84% of mortgages were handed out by the private sector, the Fed says.

Only a small fraction of subprime mortgages were given to low- and moderate-income Americans. And Fannie and Freddie don't hand out loans—they buy loans from private lenders. The "turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages," the President's Working Group on Financial Markets said.