Torture versus collateral damage; the bigger evil?

[motorfirebox]

Nope not false, true. Regardless of the things that were done, those loans were bad and the would not have been made if the gov hadn't forced them to be made. So that is it. Bad loans made under duress that eventually went bad. Some surprise that that led to trouble.

It is a necessary part of the financial system that some people win and some people lose. In this case, the bad results of those bad loans would be passed back to the government itself and, for the most part, harmlessly absorbed. No, it wouldn't be indefinitely sustainable, but the damage it could do on its own was pretty sharply limited.

What caused it to snowball into an economy-wrecker was actual, intentional fraud. Do you understand that? If you lend me a nickel and I don't pay it back, you're out a nickel, regardless of whether someone forced you to lend me that nickel or not (and the fact that Fannie and Freddie will pay your nickel if I fail to takes a lot of the sting out of it). If you lend me a nickel, and then bet someone else a hundred million dollars that I'll pay you back, and show them fraudulent documents indicating that I'll probably pay you back, you can't blame me when you lose that hundred million. That was all you.

Yep. I'll go with all of that as contributing factors. Fannie and Freddie were mixed up in all of this and they were widely believed to be no risk because no matter how bad they screwed up, the gov would step in.

Uh, Fannie and Freddie weren't the ones who propagated the idea that securitizing risky loans made them less risky. That was... private investment.

Dayuhan, bubbling and nosediving are what I see indicated--I'll admit we're not there yet. As for what we need, re: government oversight and private investment, what we need is for fraudsters and enemies of the state to be thrown in jail for their crimes. We can't function as a society when some groups are above the law, and the group that most flagrantly and exorbitantly flaunts the law in the US these days is investment bankers. It's useless to talk about more or less oversight when that oversight is utterly toothless.