“Financially, yes, but should the government (who was largely responsible for the problem to begin with) force it?”
That’s not an accurate description of the crisis despite the constant repetition of that theme around here.
The bulk of subprime loans and the riskiest were created by non-depository Wall Street firms that were exempt from the CRA and virtually any other regulation. They were mining the subprime market because it was extremely profitable, not because of any government pressure. There was government pressure on retail banks and depository institutions but it didn’t apply to the non-depository firms and pure lenders.
The development of the subprime industry by Argent, Ameriquest, Ownit, Countrywide, and the other major players is the basis of Muolo and Padilla’s ‘Chain of Blame’. It’s well worth reading.
I seem to remember even in the 90s, you had conventional conforming, some banks doing loans in their own portfolio (i.e., not securitized or sold), and the only subprimers were the Citifinancial and Household types. And they still required some equity or down payment.
Then you had FHA. That’s about it. Even when FNMA allowed down payments as low as 10%, which I think started in the 90s, it wasn’t too bad.
I do wonder if we need to roll back or modify the Gramm–Leach–Bliley Act...if I’m correct I think that was the catalyst for a lot of this.
This is true, and the subprime crisis did not become such until all that bad paper was bought up by the TBTF entities.
Who needs to go to jail here? In my opinion it's the rating agencies who slapped AAA on all that crap, but I'm not holding my breath waiting for that to happen.