Quote:
Originally Posted by chucklesR
Do it again Rick ! Document how the present administration encouraged John and Mary to take a risk on a house that was too big for them to pay for, using a ARM etc..) Tell me how a politican with a approval rating of what, around 20 got so many people to do what they wanted. Show me the money man.
I love a good story. I'm getting popcorn.
|
Two words... Alan Greespan. This guy did it almost single handed. First, in reacting to 9/11 he dumped rates 5 points in 12 months. Some could argue this was necessary. What wasn't necessary was keeping them so low for as long as he did. This was the first step in the creation of the housing bubble.
Next ... 2 and 3 year ARMS. Again, if it wasn't Greespan's idea, it should have been as his Wall Street buddies rolled out these programs. This is was created the sub prime mess. I was working for a normal small bank at the time and we watched our volume took a nose dive as Wall ramped up their marketing program on the teaser loans and began systematically changing the way mortgages were made. It was a brand new ball game and if you wanted to play, you had to bring out the same products.
Bearn Stearns owned EMC mortgage
Lehman owned Aurora Loan services
Merrill Lynch owned First Franklin Mortgage
I forget who owned Option One
These investment banks were making money hand over fist in selling MBS to their investors and needed more and more mortgages to fill demand.
There were more but these are the guys who effectively changed the mortgage industry. The Bush administration took a hands off policy, no regulations at all governing these guys. Commercial Banks had regulations, but not Wall St.
more to come