Anatomy of culpability

Government policies and 'loophole mining' contributed to the US subprime crisis and policymakers should heed the lessons

If the global financial crisis has caused a decline in the popularity of the free market system, then "Reforming America's Housing Financial Market", a report to Congress submitted by the US Treasury and the Department of Housing and Urban Development implies an end to the government's flawed home policy.

The US real estate market had more government involvement than nearly any other sector. Congress passed many laws that encouraged people to own a home. For example, in addition to setting up government-sponsored enterprises (GSEs) such as The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), income tax deductions for mortgage interest were permitted and exemptions from capital gains tax were allowed. The purpose of these measures was to make mortgages more easily available to people eager to buy a home.