This is the Cato Daily Podcast for Monday, February 13th, 2012.

I'm Caleb Brown.

The Federal Housing Administration was a key player in the housing crisis, but its role in keeping

that housing bubble inflated after the crisis

may be more important.

Mark Calabria is director of the Cato Institute's Financial Regulation Studies,

and author of the new report, Fixing Mortgage Finance, what to do with the Federal Housing

Administration.

In 2000, Fannie Mae introduced its first zero-down payment product, and so FHA has long

had a niche in the market where it was the

product you got if you didn't if you couldn't come up with much of a down payment and

so you really saw throughout at least until after the bubble burst the rest of the market grab away that low down payment market

share.

Okay, so FHA sort of had the 3.5% down as like they're sort of the primary product for a lot of people.

Absolutely, you know, and of course starting in its creation in the 30s when it started out with 20 percent

down over the years it's gotten lower and even then it's certainly worth noting that

when it was created in the 30s the typical down payment was more like 40 or 50 percent so

FHA has always led the market in terms of low down payment products and that's really kind of

been their niche now in the past particularly when when it was created it

really was a sort of combination of low down payment but prime quality

credit so it was really the A type borrower.

And you really saw a drift in the 2000s and this got worse during the crisis where

...