The financial and housing crisis of the last
few years was worse in countries where governments were heavily
involved in the once-booming mortgage business, the International
Monetary Fund (IMF) said Wednesday.
In its new housing report, the IMF singled out the United States,
where government-backed mortgage lenders Fannie Mae and Freddie Mac
helped drive an unhealthy credit boom in the early 2000s that later
provoked a collapse of the country's housing sector.
Plunging home values sparked a wave of mortgage defaults starting
in 2007 that left banks and other lenders teetering on the brink of
bankruptcy, plunging the world into its worst financial crisis since
the Great Depression of the 1930s.
The IMF report comes as the U.S. and many other governments are
considering drastic overhauls of their mortgage markets to put their
housing sectors on firmer ground and help prevent the next crisis.
"Government participation in housing finance exacerbated house
price swings and amplified mortgage credit growth during the run-up
to the recent crisis, particularly in advanced economies," the IMF
wrote. "Countries with more government involvement also experienced
deeper house price declines."
The IMF recommended a "more careful calibration of government
participation," coupled with better regulation of private mortgage
lenders that also contributed to the crisis by relaxing their
standards for loans during the credit boom.
