Romneymania keeps sweeping America.

[old timey villain]

I am supporting.  OBAMA 2012 

Does your all-caps declaration of your support of a failed Presidency have anything to do with enthusiam issues among the Republicans?

We have two visions on a failed presidency. I think this president came into office with a mess

Obama didn't "inherit" the mess.  As a well-bribed Fannie Mae senator in the ruling Congressional majority after 2006, he voted for every bit of it.

The crash was caused by the collapse of the housing bubble.  The housing bubble was caused by the government (yes, including some liberal Republicans like Bush) forcing lenders to make politically-correct loans to "eliminate the racial gap in housing".

Come on, Whyte Rain. You know good and well that fannie and freddie are not to blame for the housing bust and financial crisis. That argument is a poorly developed red herring pitched by Republicans and Wall Street when the entire country, rightfully, was incredibly pissed at them.

Is your unbridled capitalism destroying the country?
NO PROBLEM!! Blame big government instead!

Study after study shows that while Fannie and Freddie did buy some risky mortgages, they didn't buy them at a high enough volume to cause the crisis. Big banks were leading the way the whole time, and you only need to look at the deregulation of the financial industry to see how they had free reign. When you look at the bare numbers- what institutions lent out TRULY risky loans to home buyers, fannie and freddie hold a miniscule portion compared to the big banks.

And this is exactly why most Americans still Blame Bush more than Obama for the economy, because they're not buying that argument.

[old timey villain]

Making irresponsible sub-prime loans was hugely profitable for companies.

You're right, but think about this:  In a free market, doesn't this sound crazy?

"Making irresponsible sub-prime loans was hugely profitable for companies."

We all know the REASON why the "irresponsible sub-prime loans were HUGELY PROFITABLE", but it seems we can't face it:  The irresponsible government guarantees.

I said it sounded crazy without acknowledging the role of government guarantees and then King went and proved it -- by trying to explain how it worked without acknowledging the role of government guarantees.

King, I have a few questions based on your explanation:

First, why would Countrywide loan $750 mil on $50 mil worth of assets?  Because they could turn around sell it for $1,000 mil.
Second, why would Goldman Sachs pay $1,000 mil for $50 mil worth of assets?  Because they would make $2,000 mil if it failed.
Third, why would AIG insure for $2,000 mil assets that were worth only $50 mil? Because the premiums on the assets that don't fail or haven't failed yet would more than cover the cost.  See life insurance plans.  This was the equivalent of a life insurance company seeing all its clients die in the same year and owing more policies than it has assets.

King, let me ask something else.  Let's say you're a banker and I come to you for a car loan.  I tell you I want to buy a Toyota Camry for $140,000 and I want you to lend me the money.  Are you going to do it?  After all, there's a lottttt of money you as the banker can make if I pay all the payments, right?  But let's say not only am I wanting to borrow $140,000 for a $35,000 car, you also learn that I'm unemployed and basically have no collateral -- other than the car -- for the loan.  Are you going to give me the money? Yes, if I was told by higher ups to say yes, which is what Countrywide told it's reps, what Goldman told Countrywide, and AIG told Goldman  You could probably make $700 easy every month on the interest I'll pay you, so think hard!  The income on interest in this system pales in comparison to the income earned on selling the debt.

I really need an answer on this loan question soon.

Also, it seems like you misunderstood what I mean by $750 mil on $50 mil.  It's $750 mil on $750 worth of homes, but about $700 mil worth of those risky mortgages end in foreclosure so it ends up only being worth $50 mil in payments from the borrowers.

Point is, it's a system that ran completely without a government involved and, in fact, thrived because there was no government intervention involved.

OK, let's go through this, because you're HALF-right:  There was definitely some "upside" to holding the crappy loans -- the value of the underlying assets (the houses) were rising and so even if the borrowers defaulted the loan-holders might -- MIGHT -- be able to get their money back easily.  But keep in mind that they would get only THEIR money BACK; any "profit" would have to be given to the original borrower. 

So, you're right about the upside.  But you 100% ignore the downside. 

Maybe it would help if we talked about some OTHER real estate investments instead of homes.  How about farm land and commercial real estate and apartment complexes?  They, like houses, were increasing in value.  Why were there no "bubbles" in those in the 1990s and 2000s?  Why weren't there "liar loans" and "no money down loans" for those?  From a lender's POV what was the most important thing that distinguished a HOME loan from any OTHER kind of real estate loan in the 1990s and 2000s?

That's right:  Thanks to taxpayer guarantees, there was no downside!  It was "heads-the-lender-wins -- he gets all that interest income or he gets to sell the loan, tails-the-taxpayer-loses". 

If you're really a Republican, I'm surprised you hadn't already noticed this.  Don't Republicans know that "whatever you subsidize (through things such as loan guarantees) you get more of"?

WhyteRain, there's an old saying in politics that goes like this: "If you're explaining, you're losing."

This usually hurts Democrats, but this year, Romney can talk until he's blue in the face about how the financial collapse if the fault of liberal and Democratic policies. But in the end, most people are still going to blame Bush and the Republicans more than Obama.