What CREATED Sub Prime paper? Answer: Congressional Mandates

Congressional Regulation and Mandates created the problems that we now have in the financial markets. Carter started it and Clinton finished it. In 2003 the administration proposed a bill that would have established some oversight of Freddie Mac and Fannie Mae with a warning that their current sloppy controls and lack of oversight (they were reporting directly to congress and exempt from the controls and oversight imposed on privately owned financial companies) was likely to cause a financial catastrophe. The democrats in congress blocked the bill with the statement that the companies were doing fine and the changes proposed would decrease the number of sub-prime loans that could be made and that was unacceptable. Sub Prime loans are the congressionally mandated loans to people that would not normally be able to obtain such a loan because their credit score indicates that they probably won't be able to repay it. In 2005 the Republicans reintroduced the measure with the same warning of looming financial catastrophe. Again the democrats blocked it for the same reason. Now that we have a financial catastrophe triggered by Freddie Mac and Fannie Mae meltdown is here, the ones responsible want to blame capitalism and private companies when it was created by congressional mandate. Of course, forcing banks to hand out welfare payments of that size seems to be a bad idea, even if the citizenry has objected to further direct taxation to accomplish the desired income redistribution.

Community Reinvestment Act

2003 attempt to tighten oversight

2005 attempt at reform

Trillion Dollar Bank Shakedown

Three stooges who helped create the crisis

An article on the evolution of the mess.

Update 9/21/08: And coverups.