TW: Had not really focused on this angle, but it seems like a good one to me. Conservatives attempt to attribute much of the housing crisis to naive, do-gooder liberals who allegedly "forced" banks to lend money to poor people so that they could get in over their heads with housing. The vehicle for this lending being Fannie Mae etc. Krugman merely asks how banks managed to screw themselves up so badly in commercial real estate where there were no allegedly naive Dems forcing them to stuff their portfolios full of bad loans to vastly over-build office buildings, hotels, warehouses etc.
From Paul Krugman at NYT:
"Zombies, zombies, everywhere. One of the enduring myths of the financial crisis has been the claim that it was the result of (a) Fannie and Freddie (b) the Community Reinvestment Act, which forced poor, helpless bankers to make loans to you-know-who. It’s a myth that won’t go away — I get asked about it almost every time I give a public lecture — even though it has been extensively debunked. (See, e.g., here.)
But reading this scary piece about commercial real estate, I realized that CRE offers yet another debunking. After all, there was no federal act driving banks to lend money for office parks and shopping malls; Fannie and Freddie weren’t in the CRE loan business; yet 55 percent — 55 percent! — of commercial mortgages that will come due before 2014 are underwater.
The lenders didn’t need government urging to dive deep into a property bubble, and drown."
http://krugman.blogs.nytimes.com/2009/11/02/cre-and-the-cra/
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