ED: I'm confused. (1) Can you point me toward the legislation that forces banks to make sub prime loans ...
(2) and is it "Social Engineering" that invented the "insured credit swap" or the idea that turned crappy loans into bonds with a AAA rating?
(3) I don't recall any of those ideas in LBJ's Great Society. AL
It's not unusual for someone who hasn't studied a situation to be confused. (1) By now there are ample poster inputs citing the legislation that gave activist groups the legal leverage to litigate every loan denial as a civil rights violation. And I suggest you double-click Mr. Stein's summary of what has transpired. It's complicated, but I believe correct.
(2) Just this evening they had a simplified version of the "insurance swaps' facts on 60 Minutes. It seems that the "meltdown" was precipitated by bad bets made in a newly invented insurance-type market that replicated the "bucket shops" of a century ago. These were betting parlors where persons could bet on the market ups and downs without taking a long or short position. Sixty Minutes explained it in the context of a ball game where the players, management, and owners have a stake in the game (with real $$$ to win or lose), while the fans could bet among themselves with no stake in the game. This kind of no-vested-interest "insurance" betting was outlawed in 1907, after a market crash. You cannot buy insurance on your neighbor's house and collect if it burns down, but thanks to Bill Clinton you could buy "insurance" betting that a home would go into foreclosure!
In the last days of Bill Clinton's presidency the congress abolished the
Anti-Bucket-Shop law (the senate by a unanimous vote), and the repeal law went even further to prohibit the states from jumping into the lurch by enacting protective legislation.
(3) The die was cast during LBJ's Great Society for a great many of today's ills, including Bill Clinton, who keeps coming up like a bad case of heartburn. When Bush Jr. took over in January of 2001, he inherited quite few of Clinton's "poison pills," including the head of the CIA, who said, "Slam dunk!" on WMD's, as a prelude to war, and the recent repeal of "Anti-Bucket-Shop" legislation, which turned loose the investment bankers to bet on mortgage foreclosures where they didn't have an insurable interest.
While one would ordinarily associate reduced regulation with the republicans, I'd say that the current fiscal debacle can be can be laid at the democrats' doorstep. You should never forget that Bill Clinton signed the law that made it all possible...then likely...and now an accomplished fact. But don't hold your breath for the drive-by BHO-fan-club media to jump on this one...they, like you, are "great fans" of LBJ's Great Society, and all that has logically followed the liberal template. EDM