High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft to buy additional rights. ft/cms/s/0/58848270-1729-11e4-8617-00144feabdc0.html#ixzz38zhX8vWI @FYI Sorry, but the root cause of the meltdown was revealed a long time ago by Thomas Woods in... Meltdown. He spared no one. Sub-prime mortgages were not the CAUSE of the event. The root cause of the event was a combination of an artificially low prime rate, a federal government suing lender to enforce affirmative action lending and millions of adjustable rate mortgages written to borrowers who would not have quailfied if Gramm-Leach-Bliley had not made CRA the governing standard for investment bank diversification. This combination of ARTIFICIAL market factors started a bubble that dragged in large-scale speculation, massive sub-prime lending and a self-amplifying increase in housing prices all based on nothing but federal manipulation. Then the Fed raised rates 17 times in a row. What did they THINK was going to happen as a result of that?? Meanwhile, the GSEs were using their implicit Taxpayer backing to buy billion$ worth of bundled securities - all peppered with the aforementioned risky paper - and selling them into the financial sector quasi-labeled AAA Treasury-Backed Securities. In fact, they were toxic assets that ultimately brought the whole system down when interest rates made millions of adjustable rate mortgages unaffordable, popping the housing bubble. This was not the fault of deregulation; it wasnt the fault of Wall Street; it was caused by federal government manipulation of the largest sector of the economy.
Posted on: Wed, 30 Jul 2014 22:38:54 +0000
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