Which is to say, the financial crisis of 2008 in his view was caused by subprime loans, which themselves were a function of US housing policy pushing the GSEs, among others, to make loans that would not otherwise meet underwriting standards. Wallison writes in the current American Spectator of May 2011.
What is perhaps most interesting to me is that he much, much clearer in this article than he is in the dissent he filed in the Financial Crisis Inquiry Commission report; it is much easier to see his points of dissent. One in particular stands out in the article:
If the government was responsible for 19.2 million of the 27 million subprime and other risky loans, that leaves 7.8 million similar loans that came from other sources. These were mortgages securitized by the private sector ... How were these mortgages the result of U.S. government housing policy? ...
Housing bubbles tend to suppress defaults. As housing prices rise, people who can’t meet their obligations can sell the house for more than they paid, or can refinance, so delinquencies are limited. By 2002, five years into the bubble that began in 1997, investors were beginning to notice that subprime and other risky loans — which usually carried higher than normal interest rates because of their risk — were not showing delinquencies or defaults commensurate with their risks. In other words, the data suggested that mortgage-backed securities (MBS) made of these loans were offering unusually high risk-adjusted yields. This stimulated the development of a private market in securitized subprime loans — something that had never existed before.
This market was about 4 percent of all mortgages made in 2002, but by 2004 had grown to 15 percent. It kept growing through 2005 and 2006, but completely collapsed in 2007, when the 10-year bubble finally topped out and began to deflate.
Thus, the 7.8 million subprime and other risky loans that were securitized during the 2000s and still outstanding in 2008 were also the indirect result of U.S. government housing policies, which had built an unprecedented bubble in the late 1990s.