Case 15.4 Fannie Maeua Johnson

Tausha Johnson
Case #15

1. In 1932, the federal government’s intervention in the market for home ownership was desirable. Not only was it desirable, but it was needed. It has been the federal government’s desire to have every American become a part of the American dream and be a homeowner. In 1932 President Hoover signed the Federal Home Loan Bank Act to establish a series of discount banks for home mortgages. This would assist in increasing the likelihood of Americans owning a home and not feeling that they were restricted because of financial pressures. Fannie Mae, Ginnie Mae, Freddie Mac were created to help bail out banks that had a growing number of defaults in mortgages. These three enterprises made it possible for banks to offer mortgages to riskier clients who normally would not
The government’s promotion of subprime mortgages created more problems that assistance. It was the initial cause of the 2008 financial crisis due to the rise in delinquencies and foreclosures. Basically many people were approved for houses that were not financially stable or capable of the long term obligation of buying a home. As subprime lending expanded, so did the crisis due to the over-regulation, deregulation and failed regulation that the government brought