Quote:
Originally Posted by detbuch
It just seems that the obfuscated system, didn't appear full blown. Otherwise, the massive failure would have happened long ago. The buying and selling of mortgages to secondary and tertiary sources, the bundling, the lowering of standards, ESPECIALLY the lowering of standards that wooed major lending institutions from time tested lending practices, surely, didn't JUST HAPPEN. Every disease begins with a germ. A massive, complex system has to be developed. It has to evolve from something simpler. I don't know the history of these phenomena, but I recall a time when it was much more difficult to get a mortgage loan. Then I recall government programs that made it easier. It seemed to be a good thing. But the culture of home buying was radically changed, and, as in every evolutionary process, no one could predict what new paths would be taken. Is it possible that if the more solid lending practices, which banks used to regulate themselves, were not tampered with, the housing market would have found more natural ways to provide affordable housing? Where there is money to be made, enterprising entrepeneurs will find a way to earn it. And if, say, a government makes it easier by changing banking standards, why struggle, just follow the new path.
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You keep trying to drag this back to the government like some socialistic parasite is at the root of the problem, but it simply is not, there is no clear chicken and egg here.
You are right to say that lending used to be different. A significant component of this is that in years past the government didn't allow commercial, investment banks and insurance houses to mingle. A repeal of this law in 1999 dramatically changed the way financial products were offered and traded as the banks now had the ability to profit from multiple facets of the same investment.
These changes weren't made for purely idiological reasons. Industry lobbied hard for changes and influence the actions of our politicians. They argued that more flexibility would allow them to better serve their customers. I'm sure there were some legitimate reasons, but hindsight is 20:20.
Was this the only reason? Heck no, as I stated above there are many pieces to this pie. If you want to place blame, place it on our continued inability to learn from past mistakes.
-spence