The banks had little to lose. They made the money for originating the loan and then dumped all the risk on the taxpayers. They packaged the risky loans into investment instruments, gave them a great rating, and everyone bought them.
No way do the banks, insurance companies, and derivatives traders get a total pass in that debacle. They may have been tempted by Gov’t policies, but it was old fashioned greed that cost them (and us) in the end.
First and foremost, thank you for your service. There is no title/rank that I have more respect for than yours.
I don’t excuse the banks, wall street, or the insurance companies anymore than I would a bunch of my soldiers who did something stupid. However, it is important to understand how we got into the situation in the first place and I tried to share some of my thoughts on that in the previous post. Leaders accept responsibility and I did not hear many in Congress step up and admit that they were wrong. I did not hear the media excoriate Frank/Dodd/Pelosi for their roles in this disaster. They protected Freddie/Fannie at every turn when the GOP expressed concern. In fact, it almost became another “racial” thing where they shamed the GOP into silence. The GOP failed as badly as the rats no matter who wanted to lead us down the path that seems so foolish now in hindsight.
Ultimately, government is supposed to preserve the rule of law for all and it failed badly. I do believe most of the blame belongs on the progressive policies that started the ball rolling. When I bought my first home the rules were strict about what I could qualify for. Progressives in government demanded relaxed rules to increase home ownership. The banks balked at this and the banksters were able to push Congress to back their play with the GSE’s Freddie/Fannie. The greed set in then and multiplied when mortgage backed derivatives became another way to make profits and minimize risks to banks.
Corruption is usually found under corrupt leadership. We must assign blame for the housing crisis going all the way back to the Community Reinvestment Act (CRA) because that is where the seeds were planted. I am sickened at the corruption that I see within our government and the relationship between the “too big to fail” corporations that seem to own our financial leadership as well as our politicians. Crony capitalism is alive and well, but ask yourself this.... if government were not involved in the market outside of enforcing the rule of law - would banks have made these loans knowing that they were going to eat the losses? The obvious answer is NO! When Uncle Sugar told them not to worry, their loans were backed by the full faith and credit of the U.S. Government the frenzy began. If Bank of America would not make the risky loan - Countrywide would. It was free money! Package the loans and sell them to investors or dump them on the GSE’s.
Congress and many Presidents deserve the most blame for the housing crisis in my opinion. These greedy banksters would not have existed or operated without the blessing of Uncle Sam.