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<p>Maybe you should take your own “advice” - lol.</p>
<p>First off, the subprime mess wasn’t just a result of lending to lower-income people (besides, banks could have given mortgages to lower income people that they could have handled), but ran the spectrum of the socio-economic ladder. </p>
<p>In the places hardest hit - Florida, California, Nevada, etc. we are talking about $300k to $600k homes/condos and the buyers were upper-middle class or speculators.</p>
<p>Second, if Fannie and Freddie didn’t exist, we still would be in this mess. While the execs at Fannie and Freddie made some bad moves as well, initially, they were in significantly better shape than banks or Wall St. firms.</p>
<p>Initially, the mortgage-backed investment vehicles that kept their value were those backed by Fannie/Freddie while those proferred by the IBs were seen as being the most troublesome.</p>
<p>Fannie/Freddie initially stayed away from the more dubious paper, but Countrywide (and other mortgage firms) threatened Fannie/Freddie by stating they would skip Fannie/Freddie altogether and go straight to the IBs if Fannie/Freddie didn’t buy their bad paper as well.</p>
<p>Third, the IBs knew that a lot of the paper they were buying and repackaging had inceasingly problematic debtors, but they ignored this since they were making so much $$ (the guys running the compliance units at the IBs knew they were being fed dubious nos.).</p>
<p>Fourth, the mortgage companies, banks and realtors were making so much $$ by the sale of the paper to the IBs - that the “cop”, in this case, the appraiser either went along since it meant more business for them or they were threatened w/ the loss of business if they didn’t go along w/ the ridiculous assessments (not dissimilar to what the accounting firms/law firms/brokerages did w/ the dot.com bubble or Enron, Tyco, etc.</p>
<p>Fifth, the reason why the big wall street firms, AIG, etc. went under or had to be rescued was due to the reckless amount of leveraging that was possible due to derivatives such as credit default swaps (Warren Buffett famously described derivatives bought speculatively as “financial weapons of mass destruction.”) which became possible due to deregulation pushed by Phil Gramm (who, btw, was McCain’s economic “guru”.</p>
<p>Phil Gramm and his wife had their hands in on every financial/business scandal/bubble of the past decade.</p>
<p>Phil Gramm was the one who was instrumental in weakening of the Glass-Steagall and was the one who fought against regulaton of derivatives trading in the Commodities Futures Modernization Act of 2000 (including the “Enron loophole”).</p>
<p>It is hardly coincidence that Gramm’s wife served on the Board of Enron and that Gramm was a Vice Chairman of UBS (and while as VC, he lobbied Congress to prevent states from enacting tougher regulations on the mortgage industry).</p>
<p>Gramm and his wife are living the highlife - meanwhile Enron is dust and UBS is in serious trouble (even putting aside the fact that they helped many wealthy clients to hide their assets overseas).</p>
<p>The commodities deregulation pushed by Gramm also played a part in the astronomical price of oil during the summer (where a small no. of hedge funds, etc. were able to buy an alarming % of oil futures contracts).</p>
<p>As for Clinton, he was always right-of-center when it came to legislation involving business (funny that conservatives still hated his guts) and while yes, the majority of the Senate did pass the repeal of Glass-Steagall, the Republicans had a veto-proof majority anyway.</p>
<p>What is happening now is just a supersized version of the S&L bubble/collapse of the 1980s - gee, I wonder what the commonalities are?</p>