So how do you know all of this

Online

lol

And yes, the government probably made a mistake in encouraging low-income households to take out mortgages on the assumption that there would not be a significant financial crisis in the future.

Visitor it's not the only government mistake

It's a drop in an ocean

I'm not even saying all government legislation is bad

just most regulations are garbage

and hurt the economy

Banks do not make risky lending like that as they have an incentive not to go broke

But it was the bubble that ensued when investors saw the subprime mortgages as an opportunity rather than a cautious investment that made thing sget hairy

unless forced

Dude you can't help making these loans if you're forced to by the state

They had to do it.

Definitely no

They wanted to because they were misinterpreted as safer than they were.

Oh they knew it wasn't safe, but regulators were on their necks

The only reason these sub prime mortgages were made was the fact that they were forced to

It's why the regulation in question was there

to stop "redlining" and build the American dream

That’s not true. If they believed it wasn’t safe, they could have gotten out of it under the provision of the law that said banks couldn’t be forced to make mortgages that were unreasonably risky or a liability to their business.

But they couldn't have thats the problem

it was a regulation

if that was the case, many regulations wouldn't be enforced today

The state does not understand these risks

And even among institutions that were affected by the law and were obligated to issue these subprime mortgages, they took up many more subprime loans than they would have been forced to under the law.

Because they were rated

by regulators

There was alot behind this

So did investors not affected by the law, who acquired even more than they ever would have needed to even if they had been subjected to the regulations.

CRA ratings

There are three ways the CRA pushed these loans:
1. The Creation Of Artificial Demand For Low-Income Mortgages.
2. Threat of regulation
3. Distorted the mortgage market

Many smaller mortgage service companies hoped to be acquired by larger banks. Increasing their CRA lending made them more attractive take-over targets

But those points don’t really do a good job of explaining the huge boom in mortgage-backed securities, especially subprime ones, in the lead-up to the crisis that significantly outstripped the government-mandated demand for them.

Yes the boom was created by the CRA

which ended in a bust

as always

All the malinvestments of the economy were cleared in the bust

CRA required lax lending standards that spread to the rest of the mortgage market. That fueled the mortgage boom and bust.

Yet you agree that the majority of the boom was at least fueled by private, non-obligatory investment not influenced directly by government intervention?

they were influecned