The Community Reinvestment Act was only one of the factors, the removal of the Glass–Steagall Act of 1933 that limited commercial bank securities activities and affiliations between commercial banks and securities firms was another. Repealed under Clinton in 1999, it allowed Insurance Companies, Banks, and Wall Street to all get into the same business. The Bad Mortgages by themselves were harmfull, but the sliced and diced bad mortgages sold as AAA rated securities found there way into everybodies balance sheet, that’s what really spread pain far and wide.
You are absolutely correct. You win post of the month.
Re post 9:
The CRA provided a source of bad mortgages, and an example to everyone else. Eliminating Glass-Steagall let those bad mortgages be securitized and drained away, making room for new ones.
It was a deadly combination!
By the way, it looks like O and his crowd are trying to do the same thing all over via the FHA, which will write mortgages with only 3.5% down. That’s less than the broker’s fee, so the house is immediately underwater. It’s only been a few years, but the default rate is starting to climb already.
Phil Gramm was the Republican leader who pushed through Glass-Steagall.
Gramm, a PhD in Economics, was convinced that US banks could be more competitive if the restrictions of Glass-Steagall were removed. Sounded so good.
Economically, it sounded so good. But as brilliant as Gramm was in understanding economic theory, he was a dunce when it came to understanding the human nature side of the equation. He let the millions of bats out of the cave.
Glass-Steagall was Rooseveltian fascism, and was rightly repealed. It was a typical Lefty way of protecting certain companies from competition while claiming you were keeping evil capitalists under control. The problem was Clinton's housing fascism, with Baby Cuomo giving speeches threatening to jail bankers who wouldn't lend to deadbeats—creating monopoly-money loans that were taxpayer-guaranteed. I'm guessing Clinton's suppport for dumping Glass-Steagall was to pay off his contributors on Wall Street who were eager to trade the worthless sub-prime mortgages he was creating.