It was the main idea that the government wasn’t going to back the bad subprimes that started the avalanche in the mortgage backed secuirty market, and because they were all chopped up and pervasive throughout the system, any financial institution that was carrying them became a pariah.
The financial crisis according to me that I posted is a bit overly simplified, just to make it easier to understand. There were other things involved in this thuggery, such as the contributions to the Community Reinvestment Act made by the Clinton administration that made good CRA ratings necessary for a financial institution to compete. They either participated or they were blackballed.
The one saving grace that we had was that the rest of the housing market was functioning normally, that is to say that rising interest rates started pricing people out of it. If everyone was getting mortgages just for breathing rather than based on affordability, rising interest rates would have had no affect.
This is why I just don’t buy the government’s reasoning. Sure many were getting mortgages they could never afford, but it was limited to the subprime stuff that government entities were major actors in. For much of it they were the middle actors, but able to cause a whole lot of damage nonetheless.
The politically connected house “flippers” are also in the bad paper mix.When the housing bubble burst they simply walked out on their obligations and their debts were also absorbed by GSEs Fannie and Fred.
The real estate speculaters with lobbyists made out like bandits as much as the poverty pimp subprime activists.
How else did certain liberal Democrats recieve such sweetheart personal real estate deals?