Community bankers were floored by the practice. On the local level, investment and capital must have a legitimate, solid value.
As you said you need to look into Fanny and Freddie. People who would not otherwise qualify for loans are who these programs existed. A bank refusing these risky consumers when the federal government is basically (but not literally) saying they'll be the cosigners could leave a bank open discrimination liability.
The government didn't force banks to run with the practice though. Smaller banks were more reserved, because they rely on more solid foundations of investment (actual assets).
This is an impossible discussion on a message board. I think the movie The Big Short is where most people seem to be drawing their opinions. There were many factors involved in the housing crash. Private sector subprime lending was a huge factor. Failed regulation was a huge factor. Yes, smaller banks were more reserved, but these GSEs weren't designed for a small bank model. The risk in theory is offset by volume. Smaller banks cannot handle the volume to mitigate the risk.
You and WVpatx (or whatever his handle is) make good points, and have a very good understanding of where the problems arose. I'm not arguing that at all. My point about small banks is about how we view debt and investment as a whole in this nation. Too much of our nations vital industries are ran like a poker hand where the player doesn't assess what could be lost as a part of the investment, we tend to only see what we can win. Yes I know this is more of my abstract mind numbing rhetoric, but hear me out. The housing market....yes government programs surely contributed.....but there is still those that jumped into the market with both feet because the water was warm. People purchased homes and lots to build homes in Florida for example without doing due diligence on the market (which was clearly over saturated - or at least heading in that direction). A cost of investment needs to be assessed in a very real, hard thorough manner. I see it kind of like a "gold rush" mentality. No matter what the market....there is always a limit to the value. As more people buy plots the value reaches a tipping point where it starts to decline. Hard to see? Yes, but bankers could see it in the bundling and re-bundling of debt, and people living in Florida could see it in the overwealming amount of houses being built. I'm saying as our scope narrows, our vision can see a little clearer.
Well, we know that is his negotiation style. Big bad alpha dog Trump gonna start pushing people around and kickin ass....we have a bully as our leader
