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4 - Financializing the American Economy and Housing Market

Published online by Cambridge University Press:  28 August 2025

Alexander Reisenbichler
Affiliation:
University of Toronto
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Summary

Chapter 4 explores how American policymakers expanded housing programs from the late 1960s to the early 1990s to address economic challenges such as rising inflation, unemployment, and deindustrialization. When high interest rates threatened mortgage lending and housing activity, policymakers created a government-backed mortgage-backed securities market with the quasi-public agencies Fannie Mae and Freddie Mac at its center. These actions aimed at restoring housing-based growth by attracting capital into housing and expanding mortgage lending at affordable rates. Moreover, policymakers expanded tax subsidies for homeownership, notably through the Tax Reform Act of 1986, and extended housing programs to stimulate economic activity in marginalized communities previously excluded from the benefits of housing-based growth. These programs contributed to the financialization of the American housing market and economy: They made the US mortgage market even more dependent on government support and tied the demand-led economy more closely to housing, as homeowners increasingly borrowed against their homes for consumer spending - further entrapping policymakers into supporting the housing sector as a growth strategy for decades to come.

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Chapter
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Through the Roof
Housing, Capitalism, and the State in America and Germany
, pp. 109 - 146
Publisher: Cambridge University Press
Print publication year: 2025

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