Quote:
Originally Posted by KillerK
What Robbie said is true, if the housing market didn't burst we wouldn't have a shitty economy.
So we need to look at what actually caused it. From what I read, it was Clinton who caused it. He signed something that forced banks to give loans to people who shouldn't.
Do you know how many people in 2004-2007 were buying homes and getting 40-80k from the bank to spend on Cars, Boats, Furniture, Electronics? Thousands and thousands of people did this.
How many people make enough money to support a $4k Mortgage ? Not a lot in say Stockton, Sacramento or Phoenix.
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What you are likely thinking about is a bill that was passed in 1977 and it worked just fine until congress/senate right at the end of Clinton's presidency passed a law that deregulated the banks. Prior to this investment banks and savings and loan banks were separate things. This bill allowed savings and loan banks to offer investment products. This also freed them up to bundle mortgages together and start selling them.
Prior to this the banks were careful about who the loaned to. They had to give some mortgages to under-qualified, but they could pick and choose those people and the number was pretty small. They choose wisely because they had to deal with the mortgages if they defaulted. With this new law they were able to make these shitty loans, then package them up and make them look nice and pretty and sell them off to other banks/investors. At this point they stopped caring about who they gave the loans to because they were going to be long gone by the time the people who got them defaulted.
They spent 5-6 years doing this and filling the banking system full of shitting mortgages. Other banks used those mortgages as the foundation upon which they built other investments so when it went bad it wasn't just one mortgage one bank, it was the entire industry that hurt and the entire housing industry and bubble that had been built on a mass selling of shitty mortgages collapsed and took with it a lot of other things.