“And that’s how they ended up in the swaps- what else were the banks to do with them but what they always did with mortgages?”
True, but lying about the quality of them is still wrong. As is too big to fail.
Alan Greenspan has been quoted as saying that the mortgage crisis was a direct result of sub-prime lending begun in Clinton’s second term after Jesse Jackson objected to red-lining in low value minority neighborhoods. The Dems response included directing Fanny May and Freddie Mac to write sub-prime loans which they bundled with profitable loans and sold to investment banks. Since the banks were slow to react by increasing their reserves they were caught short when the feces hit the fan in 2008 and became the Dems whipping boys to deflect blame from themselves. It is worth noting that:
1. The realtors played fast and loose with borrower apps of all applicants in their rush to make money while the lending capital spigot was wide open.
2. Even after the problem was exposed the banks were slow to respond.
3. Fanny May and Freddie Mac executives received obscene bonuses despite public criticisms.
4. And though I’m not a huge George Bush fan, his administration did attempt on 16 different occasions to get congress to change this policy.
5. The policy has not changed, sub-prime loans are still being written.
6. Banks are still failing tests of their readiness to combat another crisis.