(T)he government wanted to extend home ownership through securitizing mortgages, the Republicans wanted less regulation and between the two you end up with mortgage bankers handing out gobs of money to anyone willing to lie about their income. The two ideologies combine to form a perfect storm. Everything went OK until property prices actually started to fall, then the riskier banks were caught with this stuff in their portfolios.After sifting through the comments on other blogs, it dawned on me that the Law of Unintended Consequences was at play here, too.
When Fannie and Freddie decided to buy up subprime loans, they did it to help po' folk buy homes. However, the mortgage brokers were paid commissions on anyone getting these loans. Consequently, it wasn't just the po' folk getting in way over their heads, it was everyone, rich and poor alike. The next door neighbors of some good friends are losing their house because they got a liar's loan on a house that then fell in value. That house was in a nice part of town, too.
Fannie and Freddie set out to make it easier to borrow money and boy did they ever!
The second thought is this: enough with the politics already! What this all comes down to is the investment companies were too incompetent to manage their businesses. Instead, they blame the Republicans for easing regulations and the Democrats for subsidizing risky borrowers. No matter who did what in DC, shouldn't you be expected to run your own business with thrift and foresight? Essentially what the blamers are saying is that they needed people like Barney Frank to watch over them. Barney can't even run a brothel in his own house and not screw it up! What makes you think he's even vaguely competent when it comes to your business?
If you're relying on the government to put boundaries on your behavior so you don't wreck everything, you're doomed already.