11-26-2008, 04:47 PM
"It was a direct result of the political decision, back in the late 1990s, to loosen the rules of lending so that home loans would be more accessible to poor people. Fannie Mae and Freddie Mac were authorized to approve risky loans."
Wrong. It's just not that simple. And then he goes off the rails with the rest of his article.
You had risky loans, sure. But the risk was spread far and wide, and backed up by securities thought to be infallible. When it was clear they weren't infallible, it wasn't just the risky loans that fell apart, but all of the other inter-connected parts as well, making the stopping of it nearly impossible. Also, so strong was the financial incentive to keep selling bad loans that some banks didn't heed the warning signs.
Wrong. It's just not that simple. And then he goes off the rails with the rest of his article.
You had risky loans, sure. But the risk was spread far and wide, and backed up by securities thought to be infallible. When it was clear they weren't infallible, it wasn't just the risky loans that fell apart, but all of the other inter-connected parts as well, making the stopping of it nearly impossible. Also, so strong was the financial incentive to keep selling bad loans that some banks didn't heed the warning signs.