It’s obviously Barney Frank’s doing. We’re just lucky he didn’t Tandava dance and end the world.

Yes, that’s right. Barney Frank is secretly Shiva.

(Background: banks carry outstanding loans due them as assets on their balance sheets.)

Got some reading to do, I guess.

It’s really, really good.

It has nothing to do with the unregulated credit default swap market where companies would effectively sell insurance on debt they have no hopes of covering if it goes under?

It has nothing to do with the ridiculous collateralized debt obligations making securities out of bad loans, where through shell games, those bad, terrible loans that Freddie and Fannie apparently originated get insured by AIG and then given AAA bond ratings?

It has nothing to do with the fact that those ratings agencies weren’t evaluating the risk of these securities properly?

Sorry, in your rush to blame Democrats, you’ve made a ludicrously simplistic argument. I can’t claim that Democrats are entirely blameless in all this, but to blame our problems on bad lending practices alone–not to mention to blame the Democrats for those practices–is to fundamentally misunderstand the function of markets to guard against risk.

The short version: the bad loans were a problem, but the much, much bigger problem was that banks and investment firms placed bets on those loans they had no hope of covering if they lost, and we sat idly by, enjoying the upswing granted by that leverage.

Of course, if we really wanted to go back and play the blame game, I seem to recall taking an economic history class (and one on the origins of the American Dream) that, if I had my book still or wasn’t, y’know, lazy, would help me prove what year the whole “American Dream = house + white picket fence” thing got started. Having yanked my final exam from my files, (which I got an A on, thankyouverymuch), it seems that housing is one of those terrific things, that, due to the ancillary and derived demand effects that flow from owning a home, stimulates the economy like mad. Which is really fun to watch after, say, a Depression and a World War. Really gets people’s juices flowing. It’s really fun to watch when you have some Americans who won’t say they think the Depression is never going to end/come back, but really do, and then see the economy explode into a sea of awesome.

Now, housing is great, but you gotta get people to buy it. So, some smart marketing people with a little lobbying thrown in, managed to whip up this whole “House + white picket fence = American Dream” idea. Pretty easy, post-WWII- troops coming home, patriotism is high, kids everywhere, we’re kicking ass with the atomic bomb but starting to get concerned/interested in futuristic living/new technologies, living that whole 1950s Eisenhower era lifestyle… realters started promoting living in the suburbs as healthier, cleaner and “more American.” The truth? It was also a hella lot cheaper to buy land out there and build on it further from cities. Makes sense- even today, a lot of land in the middle of no where is cheaper than an apt in NYC.

Anyways, (and I apologize for not being able/not being patient enough to source other than my memory of this class and my tax law classes… Take it with a grain of salt, if you must), from there, our tax code and other laws started pushing more towards having houses for everyone, which eventually spun us towards the whole deregulate the loan standards so more people can live the American Dream ™.

I’m not saying blame Eisenhower or marketers or the Depression (although that would be a great paper to write and an even greater t-shirt…)- but I think it’s a mistake to say that this mess just arose out of nowhere during Clinton’s administration, or from loan deregulation alone. We set the seeds for this the minute we said everyone in America should aspire to own a home, and wrote our tax code so it was more beneficial to own a home, tax wise. Which, if I might again point out one recent example that’s on the top of my mind- IRC 121, which was passed in ‘97 by the Republican Congress during a Democratic Executive administration. BOTH parties are to blame. And outside of politics, it’s all of us who let this “House = American Dream” meme spin out of control.

Apparently, some of you honestly think that the Democratic party (who couldn’t get jack done in the first six years of Bush’s administration since they were a minority and a weak one at that, then couldn’t accomplish jack the last 2 years because the Republican minority used the tactics to stall much of Congress that they cried foul about if the Democrats tried to use them during the previous six years) was magically able to thwart the best efforts of the poor, forward thinking Republicans during this time and put in place and defend the worst of lending practices because they got 100 grand from a couple of private companies who don’t actually lend money to home buyers.

And by the way, those lists with Dodd at the top of the Fannie/Feddie money getting list ignore McCain’s acceptance of cash for his campaign in excess of Dodd’s.

Bottom line — the mortgage/credit crisis was caused by unqualified home buyers getting loans they never should have gotten, and by qualified home buyers buying more than they could afford. The lenders are to blame for giving the loans, and liberals in Congress — like Barney Frank and his ilk — are to blame for pushing Fannie Mae and Freddie Mac to encourage those types of loans. Those Democrats behaved the way they did because they wanted to make sure that EVERY American was able to buy a home

But look, the Maverick has started a new game, same rules, higher stakes, better looking women.