Not letting the Banks off the hook, but didn’t the Community Reinvestment Act require Banks to give a high percentage of their home loans in the ‘sub-prime’ category so more minorities could own? Under penalty of prosecution? That aspect is missing from this story.
Yep. Actually, I think it wasn’t penalty of prosecution that was the big stick, but risks to renewal of the bank charter.
Also, the GSEs (Fannie/Freddie) lowered their mortgage standards so they bought the crap loans that were made.
Then, they tried to shift some of the blame to the ratings agencies (who did deserve heat).