“But all the White House would have needed to do in, say, early ‘05, was to repeatedly make it clear that housing prices were getting way out of touch with fundamentals, and that investing in mortgage backed instruments was entirely at your own risk.”
They did; they did even more than that and they submitted a plan to end the accumulation of the virus in Freddie and Fannie, which, with their institutional size were the enablers of the real estate bubble. The plan made it out of committee in the Senate and lost in a full Senate vote - all the GOP for it and all the Dims voted against it. That was just one of a set of similar efforts that began in 2000 and again in 2003; when Greenspan told everyone that the continued growth of Freddie and Fannie and the continued spread between their assets and liabilities (taking on fundamentally unsound mortgages) was going to create a systemic failure. Twelve times Bush emissaries met with Congressional reps with Freddie and Fannie oversight, between 2000 and 2005, seeking to reign-in Freddie and Fannie and each time Freddie and Fannie’s enablers, led by FranknDodd obstructed the reforms.
“But all the White House would have needed to do in, say, early ‘05, was to repeatedly make it clear that housing prices were getting way out of touch with fundamentals, and that investing in mortgage backed instruments was entirely at your own risk.”
If they said this, was there some sort of secret "Hey guys, this is just for the press, we really don't mean it" translation for the party-hearty traders?