A passionate explanation of how the Community Reinvestment Act started the housing bubble is offered by Lawrence Kudlow on CNBC.
I have tried to keep an open mind through my discovery of the entire issue. This video lays blame at the hands of Democrats and the Community Reinvestment Act which has it's mission to force banks to make loans to people who wouldn't ordinarily qualify. I don't know all of the details of this program, but these videos reinforce everything I have read and watched to date. With the information I have so far, I don't believe it was the only problem, but it seems very reasonable this was the major, initial contributing factor.
The sub prime mortgages were at the heart of the housing bubble because they created a larger pool of buyers (higher demand) than was actually in the market. With increased demand came higher prices. Higher prices brought speculation, from speculators, Wall Street and other mortgage lending institutions. Low interest rates set by the Fed fueled the growth of the mortgage buble.
None of this, however, would have started without bringing in $1.7 trillion dollars of sub prime mortgages through a program to "encourage" people to buy homes without being qualified. This encouragement was brought to bear directly from the Community Reinvestment Act. Take particular note to the "regulatory changes of 1995" section. It outlines the whole tragic mess as Wall Street "securitized" sub prime loans that fell under the CRA's guidelines.
I am trying to get to the bottom of the role of credit default swaps and how that plays into this problem. You can read my summary of the dire economic problems here.
Regardless, this is the best summary of the problem I have watched so far.
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