Quote:I'm sure that's part of the story, but that's not exactly the way I see it.


Banks were encouraged to make subprime mortgages by the fact that they could sell the mortgages to 3rd parties who then bundled them and then cut the bundles up into mortgage backed securities which were sold on the open market to investors, who mistakenly thought that since these mortgage backed securities contained many mortgages, that they were sufficiently diversified, and that that would mitigate their risk. Which of course, in hindsight, was total nonsense. Nobody thought about the fact that all the mortgages could go bad at once. All people saw was real estate prices rising steadily. As long as real estate prices kept going up, everything was fine.


I'm sure the government had a role in this whole fiasco, but a lot of the blame, if you want to assign blame, should go to the free market, in which people saw that other people were making a whole lot of money, and they didn't want to get left out. Large institutions got involved in investments they didn't really understand.


You can cherry pick aspects of the whole affair in order to support your thesis that government is too big, but the fact is, it was basically driven by simple greed and the delusions and ignorance of people who were scared of missing out on getting richer.

All of that is true, however the subprime market would not have existed if not for the state interfering in the first place. A mortgage is a risk investment for banks they are waging if you'll pay off the note they have no desire to be landlords. Removing the risk created the subprime market, I believe there was even a percentage of subprime loans that where mandatory starting in the 90s

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