White Picket Finance: The Remaking of the U.S. Mortgage Market, 1932-1960

in: Hubert Bonin, Niels-Viggo Haueter, Alfredo Gigliobianco, and Harold James (ed.) Public Policies and the Direction of Financial Flows, Bucharest 2012

This paper tracks the history of government intervention in the U.S. mortgage market between 1932 and the 1960s, a period in which the system for housing finance underwent a fundamental transformation. Whereas prior to 1930 the government had little involvement in the mortgage market, by the 1960s it was a major player. These interventions were triggered in part by economic crises, particularly the Great Depression. Yet, as I argue in this paper, they were also motivated by a cultural understanding of homeownership as central to American identity and the rise of housing policy as a substitute for other forms of social assistance. Many of the instruments established during these years to direct the flow of credit toward housing would emerge as central features of the housing market that persist to the present day. These policies mark the beginning of the permanent subsidisation of residential mortgage credit. In addition, beyond introducing long-term debt instruments to the consumer, they fostered the depersonalisation of credit relations. In this way, I also show that some of the weaknesses that have contributed to current U.S. housingmarket woes found their inception in the policy responses to the Great Depression.

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