Another bad law was the ability to write off mortgage interest. Americans then started looking at their houses as investments, not shelter.

Here's a good article:

http://query.nytimes.com/gst/fullpag...gewanted=print

Near the bottom:

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

Barney Frank is a clueless dolt... has been proven many times over and again.

I think you are talking about the Community Reinvestment Act, which I think was originally a product of the Carter administration and is now being blamed by all the Repuglicans for landing us where we are today.

When I hear that story my mind spins a brody (Or maybe I should call it a Booth) It's hard to know sometimes whether a politician is telling the truth or not (A quality they share with truckdrivers) Sometimes, like in this example, I actually know the details of what they are discussing and I totally see through the bullshit.

The Community Reinvestment Act only covers depository ionstitutions.

Less than 20% of all sub-prime loans were originated by depository institutions. The rest came from investment banks, or lenders that were organized specifically to be exempt from as many regulations as possible. Like Countrywide. And guess what; Depository institutions have a much smaller percentage of bad loans than the other guys. To try to blame the current situation on this program is to lose all your credibility with me immediately.

It's like the guy my real estate company brought in to our last monthly sales meeting who said we shouldn't worry too much about our budget deficit because Japan's is larger when expressed a % of GDP. I stood, yelled bullshit & walked out.

Clinton, aided by Summers and Rubin, with the help of Phil Gramm from the other side of the aisle actually presided over the greatest period of de-regulation of the financial services industry in our nations history. Look at where it has led us.

I know enough about the real estate and mortgage industries to know bullshit when I hear it. I could offer an entiire diatribe on how the CRA is not in any way responsible for our current situation, but in fact was/is an effective prgram to help working people realize the American Dream of home ownership, but I have work to do.

So here you are, referencing a 5 year old article in which the Repuglicans (The ones who are supposedly in favor of no regulation of anything at all) are advocating greater regulation of Fannie & Freddie, and the Dumbocrats (The ones who want to protect everyone from everything via as many stupid laws as possible) are advocating less regulation.

I think this piece speaks more to positively Orwellian nature of American politics than it does to anything relating to economics or the housing "crisis"

And we may actually agree on one thing- Frank is a total political whore, just like 90+ percent of Congress, regardless of party affiliation.

It was another piece of law, not the CRA.

I'm calling BS on you. What was it?

And the great Alan Greenspan himself, testifying before Congress today admitted to being ideologically mistaken in his original belief that markets function best when left unregulated

At least the SOB can (sort of and grudgingly) admit when he was wrong.

Vassaho and Big Whatever should take note of that. As far as I know, Greenspan wasn't struck dead by lightning for admitting he f#@&ed up the global economy. Maybe one of them could try admitting somthing once, just to test the waters & see what happens.

The reason derivatives were left unregulated is because it's impossible to regulate them.

There is enough consumer protection laws out there.

People(and business) simply have to take responsibility for their actions.

What about the law that allows mortgage interest to be tax deductible? Can't say how many times I've heard that people think it's free money.

That was the seed of the problem. A house is shelter, not an investment.

I have to admit, I'm not totally educated whatsoever on the subject. Still doing lots of research, and I imagine a lot of books will come out about it. There's already one "confessions of an insider" or something like that. I think I'll pick it up.

Derivatives coukd be easily regulated via margin requirements, or simply through limiting the types of derivatives that are allowed to be traded.

On the one hand, you seem to be blaming derivatives, which are totally unregulated, and at the same time blaming excess regulation.

You need to pick an opinion and stick to it, you're starting to sound like John McCain.

And the whole reason we need consumer protection laws and intelligent regulation of the banking and finance industries is that people and corporations (especially corporations) frequently do not want to take responsibility for their actions. They just want to make as much money as they can, screw everybody else. Laws should offer some measure of protection to people like you and me against paople like that.

The mortgage interest tax deduction is basically a good idea. It's just been taken to excess. I would suggest a limit, say a million bucks tops & for primary residences only.

I am not ready to state my opinion here as to the seed of the problem. I have a job & a life that prevent me from having sufficient time to explain my opinion to everybody here that would be attacking me.

If you want to educate yourself, start with Adam Smith & Karl Marx. The Wealth of Nations & Das Kapital. Skip Ayn Rand.

You also might try-

The (Mis)Behavior of Markets by Benoit Mandelbrot. This guy is a genius & the book is a bit dense in places, but it's worth the effort.

Against the Gods. I can't remember the author, this is an excellent story of the history and nature of risk.

Folled By Randomness by Nassim Nicholas Taleb. A brilliant author who will give you some insight into the stupidity that permeates the so-called science of economics.

A Brief History of Economic Genius by Paul Strathern. Traces the history of Economics up until the beginning of the 21st century.

The Great Crash by John Kenneth Galbraith. A brilliant work by one of the great economists of all time.

When Genius Failed. I can't remember the author, but this is a very well written story about the collapse of Long Term Capital Management. That was the hedge fund that went bust several years ago and nearly took the global economy with it.

Happy reading!

I think it's a terrible idea(mortgage interest deduction). How many Americans don't even understand how a tax deduction works? Can't tell you how many times I've heard "a tax deduction basically means it's free".

Too many people treating their houses as investments, that's all it boils down to. Many of these sub-prime mortgages were people hoping to make a quick buck flipping their house after the payments go up. It worked, for a while....

My thoughts are clear, I do not like regulation, and I think regulation also contributed to the problem. Did lack of regulation also contribute? Yes.... both derivatives and mortgages.