After reading the Sun Journal’s editorial, “Regulation usually rooted in real problems” (Dec. 8), I would like to expand on the statement made about the 2010 Dodd-Frank law that intends to stop big banks from taking risks that led to the fiscal crisis in 2008.

In my opinion, banks were required to take risks based on government housing regulations. The over-regulating Dodd-Frank Act is the wrong response.

According to Peter Wallison of the American Enterprise Institute, Congress planted the seeds of the crisis in 1992 when it set goals for Fannie Mae and Freddie Mac and authorized them to buy mortgages from banks and other lenders. Congress directed Fannie and Freddie to meet a quota of mortgage loans to low-income borrowers. Then the Department of Housing and Urban Development was given the authority to increase the quotas. HUD also required banks to lower the down payment on houses from 20 to 5 percent.

In 1995, Fannie and Freddie were buying mortgages with 3 percent down, and in 2000 they were accepting loans with zero down payments from applicants with weak credit histories.

Because of the new, easy credit terms, housing prices began to rise. That bubble kept growing until 2007 when housing prices began to fall. Borrowers couldn’t pay their mortgages by refinancing or selling their homes. Potential mortgage investors were encouraged by the duration of the bubble.

The number of defaults in 2008 was unprecedented. The mortgage-backed security market collapsed.

The government’s own housing policies created the crisis.

Diana Holcomb, Norway