I think this is way to conspiracy minded CAR. I really think all that happened was everyone wanted on the gravy train. Homeowners loved it cause they felt they were getting rich. Home builders loved it cause they could build and sell more and more expensive homes. Your ‘median’ worker (plumber, cabinet maker, store manager) loved it cause there was work galore and people were buying most anything and everything, even at higher and higher pricing. The banks loved it cause the refi fees and off loading of risk to GSE’s/wall street ment rising profits and fatter and fatter bonus’s. The local governments loved it cause the taxes were rolling in, allowing large wage and benifit increases to employees, who also loved it and didnt cause problems.

And the politicans loved it cause everyone was happy; ensuring their continued re-elections.

Then the party started to falter. We ran out of people qualified to buy/own houses. So we just qualified more and more, regardless of anything, cause the party needed to continue. Unemployment was still an unexceptable 6%+, and the stock market was still down from its y2k highs.

It just so happened the GSE’s were late to the game, having gotten caught up in the whole ‘accounting does matter’ problem, and were a useful tool for 2004 and 2006 re-elections. Gotta keep everyone happy and all. (Didnt you know the constitution GUARENTEED it, it is right there, “the right to life, liberty, and happyness (as defined by 3000sqft houses and granite countertops). Besides, housing never goes down, so it is a safe investment for your tax money.

So fannie and freddie gotta play along cause the politicans needed them to keep everyone happy and voting. I really dont think any of them ‘knew’ this was coming, with the possible exception of some bankers. We have proved time and time again the inability to see past the next election cycle or our own wallet. Regardless of party, sex or age/education level obtained.

To put it another, shorter, way. The risk/reward payouts were, and still are, out of wack with each other. People did what they thought was best for themselves at each step of the way, and communally we ran off a cliff. There was no ‘legion of doom’ plotting their raiding. There is no secret lair full of palm trees and ‘comfort women’ to escape to. There was/is no real thinking in general. Each and every person did what was best for themselves and those they relied upon. The problem is that the timelines were measured in months or quarters, instead of decades or lifetimes.