From: steve harley
On 2010-09-20 18:12 , William Robb wrote:
A lot of the recession was caused by people who just didn't think things
> through when they were taking out those subprime mortgages.
leaving aside the sociodynamics of mortgage hucksterism, and the
financial education that almost no one in the US receives, it is the
bankers -- the professionals at risk management -- who didn't evaluate
the risk properly ... they sold riskier and riskier loans as they
invented cleverer ways to ignore the risk; Clinton merely turned them loose
The bankers who issued those risky mortgages did so knowing the risk.
The deception was intentional.
The "system" rewarded them for their deception because they could turn
around and sell the mortgages before the borrower had time to get into
trouble. The local banks got paid up front. They'd have never issued
sub-prime mortgages if they were holding the loans themselves and
assuming the risk in house. And a surprising number of borrowers who
were steered into sub-prime mortgages were actually qualified for
conventional, lower interest rate, prime mortgages.
Clinton's signing of the Gramm-Leach-Bliley didn't turn the local
bankers loose, it turned the investment banks loose on the local banks,
allowing them to commingle their investment portfolios with commercial
banking operations.
The money followed the risk, because that's where the higher returns
were. The real problem is the investor class who bought the derivatives
didn't know what they were doing, and didn't understand the risk themselves.
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