> the American government promoted numerous policies to lower mortgage lending standards
Again, where do you think these reforms come from, exactly? Grassroots movements? Where do you think the standards were before they were lowered and why were they initially higher? Do you think these ideas are voted into effect by individual citizens well informed on the facts of how it would affect the economy? Or based on advice by experts who did the same?
If corporations and private firms were so appalled by the government lowering the standards, they could've easily formed internal agreements to simply not lower their own standards or lobbied against it. But they didn't, did they?
Again and again, companies exert enormous effort to create and find loopholes and weaknesses in law, abandoning all ethics in the process and causing massive problems for society. And somehow this is blamed on government? It's ridiculous.
A cat and mouse game between legislation and reckless behavior is not a moral equilibrium where both sides are responsible for the outcome.
Sometimes an explanation aimed at children is the right explanation, and all the adults are just shifting the blame and hiding behind the status quo.
The government was guaranteeing a significant fraction of subprime mortgages. This meant risk-free gains for corporations that bought the securities backed by them.
That in turned guaranteed a rise in the market demand for MBSs backed by subprime mortgages, and with it, systemic risk. It was an inevitable consequence of the policy:
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
> If corporations and private firms were so appalled by the government lowering the standards, they could've easily formed internal agreements to simply not lower their own standards
Wouldn't that have been illegal on multiple grounds?
No, quite the opposite. It's almost always possible to be safer than what is lawfully required, instead its hard to be riskier than what is lawfully required.
Refusing to sell mortgage backed securities based on subprime mortgages is unlikely to cause you to be prosecuted. In fact, I do it every day.
The strawman that supposedly justifies taking the risk anyway (everybody else is doing it and we would lose to the competition) is coherent but equivalent to "Billy was also doing it, and he's getting all the girls" when you got caught smoking cigarettes at school.
>Again, where do you think these reforms come from, exactly?
From the federal government. That's the whole point.
>they could've easily formed internal agreements to simply not lower their own standards
No.These policies were literally designed to make it illegal.
>Again and again, companies exert enormous effort to create and find loopholes and weaknesses in law, abandoning all ethics in the process and causing massive problems for society. And somehow this is blamed on government?
Yes.
>Sometimes an explanation aimed at children is the right explanation
Again, where do you think these reforms come from, exactly? Grassroots movements? Where do you think the standards were before they were lowered and why were they initially higher? Do you think these ideas are voted into effect by individual citizens well informed on the facts of how it would affect the economy? Or based on advice by experts who did the same?
If corporations and private firms were so appalled by the government lowering the standards, they could've easily formed internal agreements to simply not lower their own standards or lobbied against it. But they didn't, did they?
Again and again, companies exert enormous effort to create and find loopholes and weaknesses in law, abandoning all ethics in the process and causing massive problems for society. And somehow this is blamed on government? It's ridiculous.
A cat and mouse game between legislation and reckless behavior is not a moral equilibrium where both sides are responsible for the outcome.
Sometimes an explanation aimed at children is the right explanation, and all the adults are just shifting the blame and hiding behind the status quo.