“The banks that were originally doing to subprimes couldn’t keep up with demand and mortgage shops were created out of thin air to fill the void.”
IIRC the mortgage shops developed out of Wall Street’s entry into the field. Unlike local banks WS didn’t have its own loan writers. A lot of shops were created by former employees of Ameriquest, Argent, and other firms that developed the subprime industry.
“but wouldn’t have mattered much without the creation of the environment by the CRA. “
Disagree. Wall Street was looking for a way to develop a large subprime mortgage market for investment purposes and the CRA didn’t cover them. CRA is small potatoes compared to what the gutting of Glass Steagall unleashed. The CRA had no regulatory power over the Wall Street firms that were not deposit takers, and Wall Street is where the huge money driving the subprime market came from.
“Rush is wrong that this wasn’t a very severe crisis. If the fed and Treasury did not step in with TARP and capital injections, the system would have melted down and massive bank runs would have created a financial catastrophe.”
Agree. Most people, Rush included, have no reason to be familiar with the capital markets. When the money markets began to break the buck the country, and the world for that matter, came to the brink of something far worse than what we have experienced to this point.
The big mistake with regards to TARP and the bailouts was not putting tight controls on how they can be used.
until you fill in the blanks, i reject your theory
Disagree. Wall Street was looking for a way to develop a large subprime mortgage market for investment purposes and the CRA didn’t cover them. CRA is small potatoes compared to what the gutting of Glass Steagall unleashed. The CRA had no regulatory power over the Wall Street firms that were not deposit takers, and Wall Street is where the huge money driving the subprime market came from.
What I am trying to say here is that the subprime market that the Wall Street firms were so interested in would not have existed without the CRA. The push of the CRA and the "ownership society" and "everyone should own a home" frrm Washington was the catalyst that created these new class of loans. Without that market intervention from the morons in DC, the housing crisis never comes about.