Bullshit. The forced loans can only account for a fraction of the balloon that the Wall Street guys created with their popcorn fart financial “instruments”.
It all started and was largely driven by a mortgage crisis that is largely due BECAUSE of loans that should have never been given at interest rates not remotely feasible.
Fannie Mae and Freddie Mac are not private businesses created by greedy evil corporate bosses flying on jets. The Community Reinvestment Act of 1977 isn’t something banks were in favor of. Banks didn’t appreciate it when they had the weight of the government bearing down on them in the early 90s forcing them to give out high risk loans at interest rates below what is realistic. Like a dam with millions of tons of water behind it, this problem built up over years. Like a dam, once there is some major crack and something gives way, it all starts crumbling down. In the US, this crack was an economic slowdown.
Like a credit card, risk is built into the interest rates, and the credit cards are highly profitable despite many people going default. What happened in the US was that you had a government for “years” forcing risky loans and not allowing the real risk to be built into the interest rates charged. Credit Cards are still profitable despite a market downturn, despite some people declaring bankruptcy……
The real structural problems that largely led to the crisis have hardly been addressed. The government is simply trying to plug holes by stuffing money into them. In the meantime some of the same characters that blew off all the warning signs and said all is OK are calling for inquisitions and talking about corporate jets, incomes……….
Whatever. But why did we bail out AIG? We backdoored the money to a bunch of European banks. And the AIG unit responsible for the credit default swaps, the London group, got their bonuses no muss no fuss.
Obama and Co are creating class warfare and reaping the benefits of the popularist outcry to pass legislation that will bankrupt our economy and turn us into socialist Europe. Sure their is plenty of blame to attach to Wall St but that does not mean that the government is entitled to take over private companies and banks, run them, control salary and redistribute wealth.
Those forced minority loans due to "Community Revitalization Act" are 5% of the mess at most. Even all the sub-prime loans are one trillion so relatively containable. As you said, it is Wall Street's derivatives and credit default swaps and bundling mortgages into securities that created most of the problem
Karl Denninger is telling it like it is http://market-ticker.denninger.net/