Government essentially forced banks to make loans based on demographics instead of the ability to pay it back. They threatened banks that did not have the right spread on their portfolio. When the banks balked at making bad loans they told them not to worry and grew Freddie and Fannie to back up the banks. Sound banking rules went out the window and the real estate frenzy was created. The increased demand led to an increase in prices and the bubble was born. The banks had little to lose. They made the money for originating the loan and then dumped all the risk on the taxpayers. They packaged the risky loans into investment instruments, gave them a great rating, and everyone bought them.
Government increased their involvement in student loans and college instantly got more expensive as more people accessed the market inflating everything and creating a college bubble as well as a new debt bubble that will be owned by... yep, the taxpayers. That one has not blown up yet, but it will.
Has there ever been a financial effort led by government that did not end in disaster? The money spent on green technology is a pittance compared to mortgages and student loans, but again, it’s complete failure.
Everytime the government gets involved in the economy they gamble with our children’s money. Their track record if horrible. We would all be better off if our fellow citizens understood this.
my only problem is this is soooo obvious.
I mean, who would give a 700k loan to someone who makes 24k-without government backing??