Here's one thing that helped in large part to cause this mess:

Sept 30, 1999

http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&pagewanted=1

"Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits."

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

"Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent."

The seeds of this were sown during the Clinton years. Anybody who tries to deny this is fooling themselves.

A better example of the difference between regulation and oversight is:

The ESRB represents a body which has oversight into the videogame industry. They in no way prevent developers from creating any videogame that they want to produce, but they observe the type of content being produced and ensure that everyone is properly informed about what they're buying.

Producing strict legislation which determines which games can be produced and prevents certain individuals from buying particular games is an example of regulation.

I'm a Browns fan, but I'll look past your incorrect football beliefs for your correct beliefs on the 'English language.'

Not at all.  The previous laws on the books were overly restrictive.  They prevented what they were meant to prevent however they also prevented other things.

The current laws should of prevented this... and oversight actions to directly stop said problems should of fixed it.  It didn't through because the people trying to stop it were stonewalled.

Exactafucktamundo. People defaulting on loans happen all the time, ESPECIALLY when they are subprime. Thats why such an unreliable security shouldn't be traded in trillions of dollars.

The payout was VERY HIGH but the risk was even higher, yet the firms rating these securities would make more money by rating them higher, so they did (Think about it, who pays credit firms to rate CDO's credit? How much money do you think they were making from CDOs? If they rate them lower, the demand becomes lower for CDOs and credit firms lose revenue.) 

If a whole bunch of people defaulted on loans alone, no biggie, they lose their house and the bank loses a little money but makes most of it back from selling the house. If you are using some unreliable individual with bad/no credit as collateral for billions of dollars in loans a potential problem WILL (not may) arise eventually, usually with the onset of lots of broke people not having enough money to pay those loans. The intiator would be an economic slowdown or crash, or high inflation (perhaps gas prices going up because of Iraq?).

People go from paying $40 a week, twice a week, to paying $90 a week twice a week for gas. For someone already on a tight budget because of their subprime loan, this is a huge hit (some people really only make $200-$300 a week). Consumer spending goes down, jobs fire people, and people default on their loans, the cycle continues.

Unless you have some evidence that these are the loans that are failing, then these stats are meaningless.

You mean the subprime loans to people who couldn't traditionally afford a mortgage? That's what was expanded under the Clinton years and what has caused this mess. Do you have any knowledge of the current crisis at all, or are you joking?

IT WAS! And we saw lots of profit from that. Our country prospered for years, but that isn't the issue. The issue is not regulating mortgage-backed assets AT ALL. These companies make their own terms, apply their own value, then disperse these assets as if mortgage was reliable. Giving more money to more people isn't the issue. Mortgage backed assets are the issue.

Sure without mortgage backed assets there would never have been nearly as many loans, but the rating, distribution, and percentage of assets distributed with subprime ratings was what caused the crash. Percentages of CDO's issued with subprime ratings went from 6% in 1994 to nearly 70% in 2006. No one can know that except the companies investing in them, yet as the rules stand the SEC can intervene on a "voluntary basis only". Giving crooks the option of whether the police can stop by or not is stupid, isn't it?

So why didn't the republicans fix this? They had congress and a pres. Why didnt they want to raise interest rates? Why didn't they try to regulate it more? Face it, they got cought with their pants down too, bush even trumpeted house ownership. They didn't think there would be a bust either and now both sides are trying to point fingers. Americans are smarter, they know that both sides screwed up. Trying to blame only one party is such a foolish and partisan position it is laughable.

This is what everyone who is blaming the Democrats is ignoring, that the Republicans had more than enough power to get this passed if they really wanted it.