>>banks to make loans to unqualified people and subsidized them through Freddie and Fanny. There's no doubt the CRA had an impact upon opening Pandora's box - but what the RINOs fypically fail to admit is the fact that the "revolutionary" Subprime operation owned by their Shrubbery's Ambassador to the Netherlands (AKA the Godfather of Subprime) wasn't a bank, and the products it originated NEVER qualified for Freddy/Fannie "subsidization" (at least not as of April/May 2007 when the CIO told the company's associates they were still very interesting in qualifying for Freddy/Fannie, but still didn't).
"Oops"
I *think* you are saying, and if so, I will agree in advance, that the 2007-2008 crisis was caused in two phases. Phase I is the CRA encouraging subprime and subdirt loans, coupled with the loosening of underwriting standards at FNM/FRE.
For many years, there was this term “conforming” as applied to loans. That term meant that the loan met strict (VERY strict) underwriting standards and had known, proven (very very low) historical default rates and was therefore a tasty investment item for institutions, domestic and international. EVEN THOUGH on the very front page of Fan and Fed prospectuses was in LARGE LETTERS “this is not an instrument of US Govt debt and is not US Govt guaranteed” that debt was UNIVERSALLY taken as govt guar’ed.
The second phase of the collapse was engendered by the originating banks and mortgage wholesalers, who saw they could write morts of worse and worse and worse quality, patch them together with mort insurance policies of higher and higher prices covering more and more hinkyness. And no matter how bad the stench from these items, they could be passed on to FNM/FRE. Either by welding a mort ins policy to them which the originator forced the borrower to buy, OR, by burying the most fetid items in bundles of less fetid items.
The lending environment became what Bill Black calls “criminogenic”, eg; encouraging criminal activity, in this case fraud. Because banking and mortgage co execs were paid based upon performance, if they wrote worse and worse morts, then they could boast their performance was booming, capture the pay for performance, and nobody was the wiser after these turd-loans were thrown into vast pools. Or, in many cases, their stock responded to massive growth trajectories [”doubling every quarter”] and they were paid in options or stock which further incented them to goose their performance by writing crapola loans. If you’ll remember, these companies were posting internet-stock-grade growth rates....and they were certainly retaining nothing for FNM/FRE put-backs. (eg; FNM/FRE forces the originator to take back crap loans if they go bad w/in 18 months) The idea was to write as many loans in 18 months as you had ink and borrowers of any kind at all.