Do I you think a greedy bank would give a sub prime loan knowing that the borrower is going to default? A greedy bank will give a sub prime loian every tme if it knows it can repackage and sell the loan to the federal government
This explains exactly why you don't understand what was going on.
The banks *farmed out* their loan operations to mortgage brokers. Private ones. Ones that didn't give a /shit/ about whether or not the borrowers could pay them back.
BECAUSE THE BROKERS' INCOMES WERE TOTALLY DEPENDENT UPON HOW MANY LOANS THEY MADE. MORE LOANS, MORE INCOME. IN MANUFACTURING, THEY CALL THIS PIECEWORK.
Piecework without QC gets you CRAP. Guaranteed. Every. Time.
And these banks accepted all these crap loans, rubber stamped them, and with the AAA rating, fobbed them off to every investor house on the planet.
You have this fantasy that it was the banks' loan officers making the loans and not private contractors. That was no longer the case with the new deregulation. Yes, the brokers were supposed to follow the same rules. They didn't. Because their jobs were not dependent on making good loans. Their jobs were dependent on how many loans they could make.
>implying the banks were selling purely to the government
No, no they weren't. They were packaging them up and selling them to the likes of Magnetar and Bear Stearns. Whether Fannie Mae and Freddie Mac existed at all is irrelevant when they had so many private buyers.
I get it, you're one of those "all government is bad" people. The thing is that none of this would have happened if the Bush administration's regulators and the Federal Reserve hadn't had a totally hands-off approach to policing this shit.
"We had no idea this would happen" - everyone who was supposed to be watching the cookie jar.
Bullshit. Absolute utter bullshit. If they didn't know what was going to happen, how did Magnetar make out so well? They saw it coming, and so did anyone who wasn't turning a blind eye. Everyone who treated these vehicles as cash and rated them as such willfully closed their minds to the fact that the music was eventually going to stop in the financial game of musical chairs. FFS, I knew the game was up when I heard Alan Greenspan spout off that people should take out variable rate mortgages at the same time mortgage rates were the lowest they had been in 40 years. I saw it coming because it wasn't my first rodeo. I, my parents, and a ton of other people around me, were direct victims of the RISDIC scandal. People I knew killed themselves.
Greenspan claimed personally that he didn't know what was going to happen. I could grow roses for billions of years on that bullshit.
As long as people thought there were dumber greedy idiots to sell to, they'd be fine.
They eventually ran out of idiots.
Tens to hundreds of thousands of people should be in jail over this. But the Obama administration turned a blind eye to it too when it became his administration's problem and simply continued the policies of GWB (the new legislation has no teeth). Because of this, we are being set up for another round of this shit in another 10-15 years. It disgusts me.
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BMO