BS. No one forced anyone to get a mortgage, or max out their home equity. It was not deregulation or derivatives that killed the golden goose. It was the government encouraging banks to lend to people with no income, jobs or assets (NINJAs) coupled with Freddie and Fannie’s guarantee on the bank loans, the Fed’s loose monetary policy and the fantasy of ever rising property values.
So both of you lay the blame squarely on Bush? Well both of you are correct as far as you go. But no enforcement of bank regulations by Bush had just as much to do with it, causing the bankers to get greedy. Now, of course, the Fed is complicit by driving down interest rates to zero, hurting savers, to allow bankers to dump to loans back on the government, which takes the loss as they peddle the loans back to the banks. Net result, savers lose, taxpayers lose, bankers win. There’s nothing new under the sun.
Suppose a casino had a game which offered an even-money bet that a card would be ten or higher (ace counts as high). Such a bet would be a sufficiently bad proposition (every $13 bet would win $5 and lose $8, for a net 3/13 loss) that few people would pay it; if someone suggested that the government should partially reimburse people who take that gamble and lose, they might claim such reimbursement wouldn't cost much since few people play the game.
Indeed, if the government were to offer e.g. 25% reimbursement, it probably wouldn't have to pay terribly much. For each $13 bet by the player, the player would win $5, and the total loss would be $8, with $6 coming from the player and $2 from the government. From the player's perspective, the expectation would be -1/13 instead of -3/13, but since the expectation would still be negative, there wouldn't be a huge number of people playing.
Increasing the reimbursement from 25% to 50%, however, would far more than double the cost of the program. With 50% reimbursement, each $13 would result in a $5 gain for the player and a $4 loss for the player, along with a $4 loss for the government; from the player's perspective, every $13 wagered would net a $1 payout. Having the game offer players a chance to lose a little money rather than a lot isn't a huge incentive to play, but having it offer a positive payout is. If players were allowed to play as much as they wanted with the above-described reimbursement schedule, there would be no reason for a rational person not to play as much as possible.
It's important to note, however, that the biggest beneficiary of the program which was supposed to benefit the "victims" of the casino's horribly-lopsided game would not be the victims who were foolish enough to play the original game, nor would be it even be the "gamblers" who could earn cash with essentially no risk by gambling with taxpayer funds. The biggest beneficiary would be the casino. For every $13 wagered, the player would get $1, taxpayers would lose $4, and the casino would get $3.
If government "bail-out" programs grow to the point that certain activities' expectations which should would naturally be negative expectations instead become positive, it should not be surprising that people flock to those activities, nor should it be surprising that huge amounts of money are "lost" there. While it may be difficult to predict exactly what level of subsidy will be sufficient to tip people's perceptions of the gain/loss balance, the fact that people will swarm to an activity once the balance does tip is not just predictable--it's a near-certainty.
It was the CRA.