The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Mon, 08 Jun 2026 16:01:38 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.8 https://corpgov.law.harvard.edu/wp-content/uploads/2024/02/cropped-photography-4-e1706898544564-1-32x32.png How the Government Is Creating Another Housing Bubble – The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu 32 32 How the Government Is Creating Another Housing Bubble https://corpgov.law.harvard.edu/2010/12/24/how-the-government-is-creating-another-housing-bubble/?utm_source=rss&utm_medium=rss&utm_campaign=how-the-government-is-creating-another-housing-bubble https://corpgov.law.harvard.edu/2010/12/24/how-the-government-is-creating-another-housing-bubble/#comments Fri, 24 Dec 2010 14:01:33 +0000 http://blogs.law.harvard.edu/corpgov/?p=14320?d=20101224090133EST Editor’s Note: Peter J. Wallison is a senior fellow at the American Enterprise Institute. This post is based on an article by Mr. Wallison and Edward J. Pinto, a resident fellow at the AEI.

It is hard to believe, but it looks like the government will soon use the taxpayers’ checkbook again to create a vast market for mortgages with low or no down payments and for overstretched borrowers with blemished credit. As in the period leading to the 2008 financial crisis, these loans will again contribute to a housing bubble, which will feed on government funding and grow to enormous size. When it collapses, housing prices will drop and a financial crisis will ensue. And, once again, the taxpayers will have to bear the costs.

In doing this, Congress is repeating the same policy mistake it made in 1992. Back then, it mandated that Fannie Mae and Freddie Mac compete with the Federal Housing Administration (FHA) for high-risk loans. Unhappily for both their shareholders and the taxpayers, Fannie and Freddie won that battle.

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