What we had is a confluence of events that worked to fuel the credit bubble.
From Glass-Steagall to the CRA programs to the GSE’s control of Congress (who wrongly slammed OFHEO/Armando Falcon who was doing his job) to Greenspan’s ultra-low interest rates to the elimination of the 30-year bond to the determination of the American people to hold onto a lifestyle that their stagnant/declining wages could no longer afford (thanks to globalization).
I am one of the greatest critics of George Bush, but he is not the only guilty party in this mess. Both Republicans and Democrats are equally guilty.
Also, the GSEs were under the gun in 2003/2004 and actually pulled back their lending while the private market took off. Most of the really bad mortgages were originated by and sold to private entities, not GSEs. The GSEs got more involved again near the end of the bubble (2007) as the legislators and other guilty parties saw the writing on the wall…and wanted to off-load their bad debt onto the GSEs by refinancing people into their loans (also FHA). EVERYBODY was complicit in this mess.
Note, we already have “bailed out” the GSEs. The current bailout plan (and more that will be forthcoming) is to save the private entities, not the GSEs.
