As I stated before, you and I disagree on what the root cause of the problem is and what the fix is. Fair enough, you have your opinion, I have mine which is based on the fact that I spent 4 years working in the industry. Not saying my opinion or perspective is any more valid than yours, mine's just formulated on what I've personally SEEN and KNOW.
There many banking CEO’s who wanted to meet their earning requirements for bonuses by pumping up earnings in a short time by accepting many loans as possible (earnings are thru fees and points). They did that by instructing mortgage orginators and underwriting departments not to verify the loan applicant’s info, and even encourage lying on the loan application for conventional mortgage loans.
This may come as a surprise to you, but MANY companies (yes, outside Banking) do whatever they can do prop up their earnings as much as possible so their C level folks can hit their target bonuses. I've worked in Advertising, the Auto Industry and Banking and seen that behavior across all three. The fact that Banks did it and continue to do it by the way, is nothing new.
The difference between Banks and other companies is the mechanism they used, collateralization, securitization and bundling are all direct results of the very laws and regulations that were aimed at the Banking industry, designed to implement "social engineering" and create permanent Democrat voting blocks. That has been pointed out above by more than just this writer (me.)
Imagine if the same scenario had happened with oh, say AUTOMOBILES, where the Government were to implement a program designed to sell cars to people who couldn't otherwise afford them, with the promise of cheap, easy money, government rebates and dealers pressured to sell cars. Oh wait, that DID happen via Cash for Clunkers, at the cost of more than $24,000 U.S. Taxpayer dollars per vehicle (Source: Edmunds.com) and now we have high rates of vechicle re-posession as a result.
You see, it's GOVERNMENT MEDDLING in Markets that causes these problems, that's the root cause analysis. The rest of the facts on record here on this thread are also valid, but the fact remains if you want to really SOLVE the problem the ROOT of it must be dealt with, the rest are symptoms that will ultimately be resolved once the root cause has been dealt with.
Have a good evening.
So if the government meddles in your business, you now have the license to deviate from common commercial practices of the past, encourage applicants to lie on their applications, threaten rating agencies by boycotting future business unless they find a way to rate your mortgage back securities without providing the loan data to the rating agency analysts??!!!!!
Now you know why I want a trial and let a judge/jury decide. My advice is don’t run a company because you will get yourself in trouble with such a logic. The first thing a government official will say during the trial is they never told you to do that and you must have misinterpretted what they said. They will be off the hook and you will be in jail.
Even worst if you are middle management, your bosses will say they never told you to do that and you must have misinterpretted what they said. They will get blamed for not supervising you closely, but you will be in jail. That is something to think about.