Definitely lots of complicity parties to blame, but this and Greenspan’s cheap money and the Republican’s repeal of Glass Steagall all contributed heavily to allowing the banks to hang themselves on their own rope of greed. The government paved the way to NINJA loans, but the banks weren’t forced to make those loans, and they may well not have if they didn’t think they could sell the toxic crap to unwary investors.
My memory of this repeal is that it was Senator Chris Dodd that lead the stupid charge to unravel this safeguard. Am I wrong in my memory of that???
BINGO. Get this man a CIGAR!!! Very eery repeat of the decade of the Roaring Twenties. We know that next decade will probably be called our ‘lost decade’. What shall the nineties be called?
“The government paved the way to NINJA loans, but the banks weren’t forced to make those loans, and they may well not have if they didn’t think they could sell the toxic crap to unwary investors.”
Well, banks were under pressure to make a certain ratio of loans in those low-income and high risk areas. Management didn’t want to get the regulators’ heat, and put pressure on their loan officers which created an atmosphere where income and debts were fudged.
From there, the banks sold off the loans as fast as they could, which led to all the problems with the bundlers/investment sellers like FNMA and FHLMC.
ps; I was a bank examiner for 27 years.