Democrats did it, even though the house and senate were ran by the Repukes at the time? Nice try. You fail.
Yes, there is plenty of blame to go around. The origins of this crisis go back to the CRA ("Community Reinvestment Act") passed late in the Carter administration, and given teeth under the anointed Clinton. The Great and Powerful Obama was the legal representative pushing Acorn's case that granted CRA teeth to block mergers, expansions and other general business practices of any bank or agency providing consumer mortgages if they didn't also provide graft, um, loans to otherwise unqualified people.
They accomplished this by personally attacking the bank\instiution's executives and families (not unlike Hitler's Brown Shirts back in the day). In the end, companies like Bank of America (BAC) set aside billions and handed it to Acorn to allow them to underwrite the loans, which (BAC, others) would then carry.
VERY VERY bad business, but this is what you get for knuckling under to blackmail. An old saying; once you pay the Dennegeld, you never get rid of the Dane. Basically, once you pay a ransom, it never goes away, just continues to rise just like dealing with any other type of playground bully.
So; we have the Feds creating pressure from one direction and tacit allowance of blackmail and personal attacks from Acorn on the other. Then the FED gets involved and starts dropping interest rates, making mortgages less expensive (in the near term). On the other side, the banking lobby gains permission to create derivatives to spread the risk (and add leverage) to their increasing portfolio of high-risk "sub-prime" mortgages that they have to carry in order to comply with new Banking regulations coming out of the Senate Banking committee, headed by Barney.
Add to this mess, ***** and Freddie are the prime purchasers of these sub prime mortgages, which creates the market furor. Until Fannie and Freddie were ordered by Frank's committee to increase dramatically its portfolio of sub-prime mortgages (to the tune of a trillion initially, to a similar target annually ) there was a limited market for sub primes. Now the originating banks can get the initial fees, then sell the mortgages\securities packages to Fannie and Freddie.
Once a liquid market was created other investment houses (US and otherwise) got in the act as the securities could be traded much like other bonds.
This entire furor was pushed and then cheer leaded by Congress and the Fed's artificially low rates.
Now the house of cards has collapsed, and we've, against all logic, bought out the over leveraged insurance and banks.
A curious aside; before Obama took office, the Democrat Congress wouldn't allow a change to the financial reporting methods under which the banks were required to value their bonds and other assets at current liquid market prices (mark-to-market). This meant that one month you had a billion in mortgage backed assets, then the market siezes, and no one wants to buy so suddenly they are worth zilch, zero, nado, zip, et al. Balance sheets are bad and the market crashes (just before an election).
This is silly; just because you can't sell your house in a day, doesn't mean that it has no value.
Once Obama took office, this rule was changed... magically balance sheets are "healthier". Ask this very quietly, could this crisis have been manipulated for political gain?
NOW... Republicans on the House Oversight panel are finally getting down to business on what caused the initial housing crisis that led to the collapse of the economy. A new 26-page report highlight's the government's role in trying to increase sub-prime home ownership.
Michelle Malkin has some details:
Political pressure led to the erosion of responsible lending practices: In the early 1990s, Fannie and Freddie began to come under considerable political pressure to lower their underwriting standards, particularly on the size of down payments and the credit quality of borrowers. (p.6)
Lower down payments led to housing prices that outpaced income growth: Once government-sponsored efforts to decrease down payments spread to the wider market, home prices became increasingly untethered from any kind of demand limited by borrowers' ability to pay. Instead, borrowers could just make smaller down payments and take on higher debt, allowing home prices to continue their unrestrained rise. Some statistics help illustrate how this occurred. Between 2001 and 2006, median home prices increased by an inflation-adjusted 50 percent, yet at the same time Americans' income failed to keep up. (p. 11)
Members of an "affordable housing" coalition shared profits with political allies to help legitimize their business practices: Fannie Mae created and used The Fannie Mae Foundation to spread millions of dollars around to politically-connected organizations like the Congressional Hispanic Caucus Institute. It also hired well-known academics to give an aura of academic rigor to policy positions favorable to Fannie Mae. One paper coauthored by now-Director of the Office of Management and Budget Peter Orszag, concluded that the chance was minimal that the GSEs were not holding sufficient capital to cover their losses in the event of a severe economic shock. The authors suggested that "the risk to the government from a potential default on GSE debt is effectively zero," and that "the expected cost to the government of providing an explicit government guarantee on $1 trillion in GSE debt is just $2 million." (p.7)
The Government Sponsored Enterprises led the way into the housing crisis: Fannie Mae and Freddie Mac were leaders in risky mortgage lending. According to an analysis presented to the Committee, between 2002 and 2007, Fannie and Freddie purchased $1.9 trillion of mortgages made to borrowers with credit scores below 660, one of the definitions of "subprime" used by federal banking regulators. This represents over 54% of all such mortgages purchased during those years. (p.24)
