“It was liberal Democrats, again led by Dodd and Frank, who for years pushed for Fannie Mae and Freddie Mac to go even further in promoting subprime mortgage loans, which are at the heart of today’s financial crisis. Alan Greenspan warned them four years ago. So did the Chairman of the Council of Economic Advisers . . . . the facts show that it was the government that pressured financial institutions in general to lend to subprime borrowers, with such things as the Community Reinvestment Act and, later, threats of legal action by then Attorney General Janet Reno if the feds did not like the statistics on who was getting loans and who wasn’t.”

Clinton-era affordable housing mandates were also a key reason for the risky lending. The Washington Examiner cited a recent study by Peter Wallison, who had prophetically warned about risky financial practices for years, finding that two-thirds of all bad mortgages were either “bought by government agencies or required to be bought by private companies under government pressure.” As the economist Thomas Sowell noted , liberal lawmakers and others ignored warnings about the dangers of these mandates:The massive harm caused by these affordable-housing mandates is discussed in a study by Ed Pinto , a former executive of Fannie Mae, a government-sponsored mortgage giant that later had to be bailed out at a cost of hundreds of billions of dollars , partly as a result of such mandates. (Pinto was a Fannie Mae executive well before its fortunes deteriorated.) Banks and mortgage companies have long been under pressure from lawmakers and regulators to give loans to people with bad credit, in order to provide “affordable housing” and promote “diversity.” That played a key role in triggering the mortgage crisis, judging from a story in the New York Times . For example, “a high-ranking Democrat telephoned executives and screamed at them to purchase more loans from low-income borrowers, according to a Congressional source.” The executives of government-backed mortgage giants Fannie Mae and Freddie Mac “eventually yielded to those pressures, effectively wagering that if things got too bad, the government would bail them out.” The Obama administration is now stepping up pressure on banks to make more risky loans, as I explain at the Washington Examiner , including setting up a Justice Department task force to sue banks that refuse to make such loans.