Originally posted by: Butterbean
Factions in the gov. want these institutions to fail - that way they get to save them in socialist manner. It's called "hurt and rescue" principle.
Clinton changed the Community Reinvestment Act so that banks essentailly had quotas. Banks were reviewed by treasury and had to prove they were making loans to a risky segment of a banks population. The subprime crisis was generated by the gov forcing banks to make loans to people. Financial instotutions were medddled with and made to serve catastrophic social engineering goals that could only hurt long run - and they did.
PERHAPS the greatest scandal of the mort gage crisis is that it is a direct result of an intentional loosening of underwriting standards - done in the name of ending discrimination, despite warnings that it could lead to wide-scale defaults.
At the crisis' core are loans that were made with virtually nonexistent underwriting standards - no verification of income or assets; little consideration of the applicant's ability to make payments; no down payment.
Most people instinctively understand that such loans are likely to be unsound. But how did the heavily-regulated banking industry end up able to engage in such foolishness"
THE REAL SCANDAL
HOW FEDS INVITED THE MORTGAGE MESS
http://www.nypost.com/seven/02...ndal_243911.htm?page=0
The Community Reinvestment Act
http://www.federalreserve.gov/...raunstein20080213a.htm
The same hurt and rescue can be seen in energy (US forced to use foreign oil) and health care (more laws passed to make more treatments mandatory for more populations - while protectiing trail lawyers who were driving MD's and hospitals out of biz). It's no co-incidence Obama is number 2 in donations from Fannie and Freddie and that he never talks about tort reform in any meaningful way to lower health costs.