@Happy
Thats true, but what could have been the potential effects of making such a move in 2004? The market was still wobbly from the crash in 2001. Housing was the basis of our entire economic structure.
With as many lobbyist around at that time from investment banks and things of that sort, who do you really think would hinder economic growth and the housing market to "do the right thing", when the housing market was still on the rise. I think in hindsight we wish they would have done it, but it wasn't going to happen then. No one wanted to touch what they didn't understand, and no one understood the complexity of the economics, not even the central bank(obviously).
The low interest rates, the G-B-L Act, the continuation of loose management was geared towards one thing, housing growth. What should have been enacted from the early 90's when this took off was regulation. CDO's are unregulated entirely, yet we have huge financial institutions investing billions upon billions in these assets, whose primary source of profits relies on payment from subprime loans? That makes no sense, and should have been jumped upon early on, not after it becomes on of the biggest source of new commercial bond issuances. Freddie Mac and Fannie Mae aren't the chief cause of this, and regulating only them and not the other companies would have crippled them.
Edit:
And to be fair it isn't entirely Republicans fault either. Bill Clinton pushed deregulation as well (he was very close to the middle, probably one of the conservate democratic presidents ever.) I really liked Bill Clinton, and I see why many people during the 90's wanted to "unleash the beast" and watch as the economy prospered. It happened according to plan, but without regulation the after effect was potentially disasterous, as we are seeing right now. The free market can't be left entirely free because greddy people exist. You can leave it free to an extent, allowing the flow of our entire economy to be in the hands of people who are only concerned about YOY profits will always eventually lead to a crash. Its not a sustainable process without government regulation of the extremes.
