What caused the mortgage mess? Democrats. No restrictions at all were placed on Fannie Mae; banks were encouraged to give ever shakier loans. Democrats created the home mortgage interst deduction which encourages Americans to buy bigger homes than they need simply for tax reasons.

The answer I would have given:

“Democratic policies including an unrestrained Fannie Mae and an increased home-mortgage interest deduction lead to an excessive amount of borrowing by consumers and a lack of oversight by banks. Democrats, who supported Fannie Mae throught the crisis, saw no problem as long is it appeard that the banks were helping them meet their social agenda regarding housing.

When the economy slowed down and many of these borrowers defaulted, banks were left holding billions in mortgages that they cannot sell.

It is common when the economy slows down that the Federal Government will step in and spend money to get the economy going again. In this case, we are targeting this spending at purchasing these loans from banks so that they will remain solvent and once again start lending money that the economy needs to grow.

This needs to be coupled with greater oversight of Fannie Mae and a gradual scaling back of the home mortgage interest deduction. When the American economy has sufficient credit again, we need to ensure that investment is directed at businesses, where it belongs, rather than at building homes much larger than those of other Westernized countries.”