In light of that, please explain Freddie and Fannie’s predicament? They did not play in the Credit Default Swap markets.. Bear Sterns did. The act contributed to some of the current problem not all. What I did state though is that CRA achieved the opposite of what was intended. It was well intentioned but misguided because it drove prices up on the very people who it was supposed to help and made responsible purchasing difficult for these people by increasing realizable demand at the current median price point, forcing these people to chase the market up.
As for the problem with CDS(s) I agree with you to a point. I would not only put the problem on the your #1 and #2 but also on the insuring agencies who didn’t bother to look under the cover of what they were insuring. If the insuring agencies writing CDS(s) had refused to cover the CDO, they would not have been sold at such low yields.. and the creators of the CDOs would not have been able to get their current bunch off their hands to turn around and form another series of CDOs. All of the so called experts were looking at graphs and all nodding their heads saying “looks good, 20% yearly increase in the underlying loan asset – so we are covered”. **Momentum investing works well until Fundamentals come and kick it in the head**
