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Originally Posted by Jim in CT
Oh Spence? You are forgetting that the derivitives market was once sufficiently regulated to prevent what happened with subprime mortgages. The repeal of that regulation was signed by that right-wing nut Bill Clinton. If that regulation had been left in place, the subprime mortgage bust would not have been nearly so bad.
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I don't think derivative market regulations were designed to tolerate the
MASSIVE amount of sub-prime risk that was injected into the system from 2002-2006. Regulatory changes helped grease the skids, but it was the allure of high returns that was the engine behind the meltdown.
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A republican congress wrote that bill, Clinton signed it. That's why I say plenty of blame for both sides. I doubt you'd ever say anything so fair. Or astute, for that matter.
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Go back and read all my old threads on the issue.
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You also seem to be ignoring the effect of the subprime mortgages themselves. You choose to ignore this, because you know it makes your side look stupid. If banks were allowed to enforce underwriting standards, none of this would have happened.
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As we've beaten to death, lending influenced by the CRA made up a fraction of the problem. Banks didn't want to enforce underwriting standards because they could take a profit for originating the loan then sell the risk. Given the demand for such securities there were few with any incentive to slow down the feeding frenzy.
-spence