Background behind the subprime mortgage meltdown

Courtesy of DaveScot at Uncommon Descent:

It’s a rather long video, but it puts the current economic crisis into perspective. It all started with a failed policy instituted by the Democrats. Now that we’re in trouble, the Democrats win again, because we’re growing government to try to fix the problem.

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10 Responses to “Background behind the subprime mortgage meltdown”

  1. CT says:

    I have been saying from the beginning there is more to this than just one party or group to blame. The American economy is way to sophisticated an intricate to be destroyed by just one person or group. Victor Davis Hansen put it best in his article Wall Street 101,

    “There is plenty of blame to go around. Greedy Wall Street speculators took mega-bonuses even when they knew their leveraged companies were tottering — and someone else would pick up the tab. Crooked or stupid politicians allowed Fannie Mae and Freddie Mac to squander billions, as they raked in campaign donations and crowed about their politically correct support for millions of shaky — and now mostly defaulting — buyers.”

    It is a shame this is election year. If it were not we might actually get some coverage of the real culprits.

  2. casey says:

    I keep hearing “both parties are to blame,” but so far I’ve seen no evidence of concerted efforts by Republicans to keep Fannie Mae and Freddie Mac running irresponsibly. On the contrary, Bush and even McCain have been arguing for regulation for years now. If you want to blame the Republicans for inaction or being unable to do what was needed to avert the crisis, okay, but what specifically did they do to bring on this crisis in the first place? Or, are we saying that “greedy Wall Street speculators” = Republicans?

  3. CT says:

    No Casey that is just it. It isn’t just Wall Street. It is Wall Street, Acorn, Fannie Mae, Freddie Mac, President Clinton, Phil Gramm, President Bush, anyone who occupied the Congress 1998-99 and 2003-08 and Ameircans who go tin over their heads in debt.

    To minimize this problem to one entity or group is ridiculous. And yes it is quite true that Bush and McCain have been arguing for regulation, but regulation was not the answer. Regulation is what got us here, because Wall Street came up with some not so ingenious Financial Engineering to beat the CRA amendment to the FSMA 1999.

    Coupling this with the increasing pressure felt from Fannie Mae and Freddie Mac on the world of sub prime loans it was to much debt with not enough capital to back it up. It burst. Most of this is a liquidity problem, but no one is realistically asking why did we get here. And it is all tied to the CRA 1977 amendment to the FSMA 1999.

    Check out CATO Institute and Heritage Foundation, they both have great information on all of this. It is a time consuming read but you can see the time line once you compile the information.

  4. casey says:

    I agree. Regulation was not the answer. It was a bandaid, but it would have helped ease the crisis we’re facing right now. It was the Democrats under Jimmy Carter that gave us the CRA, and it was Clinton who pressed for even more risky loans. I don’t see how you can argue that both parties are equally to blame.

  5. CT says:

    The Republicans, under President Bush, brought us the American Dream Downpayment Act and Zero Downpayment Act. Their arrival correlates with the massive spike in subprime loans being issued versus the amount of all mortgage origination’s. As far as the regulation the markets would have regulated themselves because of profitability, meaning no high risk loans would have been issued unless there was a market for them. The combination of the CRA and FSMA created that market and Wall Street took the ball and ran with it. Pairing liberal entitlement with Conservative free market is a recipe for disaster. I would have rather stayed under Glass Steagall than deal with the abomination the FSMA turned into. It is that reason I blame the Democrats as well as the Republicans for allowing it to happen.

  6. casey says:

    Those were obviously bad pieces of legislation, but I’m not sure they were as damaging as the CRA. They certainly weren’t the prime cause of the problem. In any case, I see why you are assigning blame to both parties. I just don’t think they’re equally to blame.

    Your latest post on the topic is right on the mark, I think. Liberal entitlement is a recipe for disaster. This kind of disaster is what liberals are going to use to take us further towards socialism (since you can’t have both a free market and liberal entitlement).

  7. CT says:

    I can understand how you draw the conclusion of placing more blame on the Dmes,and you might be doing so rightfully. But nevertheless the Republicans have been acting like Liberals for the past 10 years. This is precisely why we need, as Conservatives, to be voting in conservative minded legislators. The pragmatic leaders we used to have, not these country club rip off neocon types, although not all neoconservatives are bad. I could stomach someone of the mindset and temperament of Charles Krauthammer, he is quite brilliant. Although on certain social and cultural issues he leaves much to be desired. Take care and keep up the great work.

  8. casey says:

    The Republicans have been acting like Liberals for the past 10 years

    Yes, indeed, they have. ::sigh::

  9. CT says:

    Lol Casey I was looking at the length of some of my posts, I will try not to eat up so much bandwidth in the future.

  10. casey says:

    What? No way. I appreciate your thoughts.