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[quote user="MichaelSol"][quote user="solzrules"][quote user="jeaton"][quote user="solzrules"] Yes.  It should burst, but I don't think it will.  It is a government mandate, and that is what created the demand in the begining.  It sure wasn't the market.  This mandate is seriously screwing with our economy in all kinds of idiotic ways, and it will not go away anytime soon.  The housing market, which in the last 3 or 4 years has been completely unrealistic, finally took a dump because reality caught up with people.  You can't charge 1 million bucks for a 2 bedroom 1 bath house in CA when people are not earning the wage to pay for it.  Creative financial loans prolonged the correction, but the correction arrived all the same.  Now just imagine what would happen if big ol hill got her way and froze forclosures?  How many banks would continue to loan money when they have no hope of recouping cost if the loan defaults?  Our government is preparing to tinker with our economy in an effort to make everyone happy and the result will be mass misery.  Ethanol is a perfect example of that, and you watch-the mortgage industry will be the next disaster.  Instead of letting the market work itself out, we'll have barackohillarain solving all of our problems - by creating new ones. [/quote]Are you saying the housing thing was caused by government mandates?[/quote]Nope.  If the gov gets involved then we'll have a REAL mess.  Right now it is just a fiasco.[/quote]President Wiliam J. Clinton pushed, at the behest of his friend Sandy Weil, for the repeal of the Glass-Steagall Act -- Depression era legislation generally designed to keep speculative pressure out of things like the mortgage industry. After Clinton signed the bill, days later his Treasury Secretary Robert Rubin resigned and accepted a job as Weil's chief sidekick at Citigroup. Just a coincidence. Weil of course wanted to take Citigroup into higher risk, higher yield investments than was permitted under G-S, where banks had been restricted from such "investments".And, this was underscored by a continuing pressure that banks, under G-S, were "discriminating" against unqualified buyers and that lending policies needed to be egalitarian. Banks were hit with lawsuits citing discrimination even as their lending policies showed the prudence of the legitimate business purpose of using financial qualifications. The subprime "mess" was all politics from the start. Weil is a big contributor to a certain candidate even today. Many of the same politicians who voted for the mess have plenty of ideas of what to vote for to fix the mess, and are receiving contributions from the same folks that benefitted from the Glass-Steagull repeal .... There is an interesting overlap in that many of the same people voted for ethanol subsidies on the basis of global warming, etc. etc.... [/quote]The government has played a big role in this subprime debacle.  The obvious aspect of that role is the Fed policy keeping the interest rates too low for too long.    But there is one other very interesting aspect of the subprime crisis that seems to be completely missing from all the popular news coverage. Michael Sol has referred to it above.  I am not aware of many details, but it seems that there was a sort of affordable housing political activism inspired government pressure on lenders to relax their loan qualification criteria because such requirements were seen as discrimination against financially disadvantaged borrowers.  In other words, prospective homebuyers who were turned down for loans because they could not afford them or had bad credit were seen as victims of discrimination by lenders who had power over them.  And the government wanted to end this form of discrimination.  So many of those unqualified homebuyers were given loans that they are unable to pay back.  Part of the leniency in loan qualification was a very low down payment requirement.  Now, with falling values, many of those unqualified buyers who cannot afford payments, are also finding the value has dropped below what they owe.  And since many of them have little or no money into the house as a down payment, they simply mail the keys back to the lender and walk away, leaving one more empty house to add to the supply of unsold homes and further depress the everybody else's home values.   Now, in the greatest irony of all, these unqualified buyers who were artificially cast as victims if they were denied loans, are now cast as super victims because they are losing their homes due to predatory lending practice of the lender who had power over them.  It is the lender's fault because they made a loan that the borrower was not qualified for.  So if the lender is prudent, they are seen as discriminating against the disadvantaged.  If the lender is not prudent, they are seen as predators against the disadvantaged.At this time, congress, the candidates, and the news media are setting the stage for an even greater government involvement in the subprime crisis.  The classic personal tragedy of losing one's home is being used to emotionally feed the call for a Katrina-like response from the government.  This of course, will be a pretext to get the government more involved with private housing just like their expanding involvement in the energy business.
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