Fannie Mae-No Politics (FNMA)

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Banks were encouraged to relax lending standards by way of faulty Gov "Homes for All" policies, aka, Affordable Housing Goals. How else were banks to comply with these Gov mandated policies? Gov was heavily promoting increased home ownership, banks happily went along with it, saw it as an opportunity to make a quick buck and took full advantage. Gov set in motion the environment of handing out loans to anyone with a pulse and banks were happy to oblige. Bad Gov policies sparked the flame which gave the banks a green light to ignore the rules and fan the blaze. Also, keep in mind Gov was and is infiltrated with ex-banking execs which orchestrated these fateful policies.

I was also very critical of the efforts of many housing groups to push low and moderate income families into homeownership. Even in normal times buying a home will not be a good idea for a person who does not have a stable employment and family situation. In a bubble, encouraging low and moderate income families to buy a house is encouraging them to throw their life's savings into the toilet.

There are rules for issuing and securitizing mortgages. These rules were completely ignored in the peak years of the bubble. Mortgages were routinely issued without proper documentation or on terms that would never pass muster with any serious underwriting process. These were bundled in securities by investment banks that knew full well they were dealing with crap and then they were blessed by the bond rating agencies with investment grade ratings. At every step, there were people who knew they were not following the law, but thought it would not matter.

The law breaking was not following the rules. Surely none of these people anticipated sinking the U.S. and world economies. They just thought they could ignore the rules to enhance their profits.

http://www.huffingtonpost.com/dean-baker/the-big-short-a-tale-of-s_b_8971184.html