Subprime Loans are Back

[thir]

In fact, this was not just "allowed" by the government, but mandated: when banks were just looking at creditworthiness, activists cried "foul", demanding that they be made to issue loans to minorities more often - even when they didn't qualify properly. So, of course they were left with loans they couldn't afford, giving them worse credit ratings and leaving banks holding bad loans as well.

The sad thing is, there still seems to be no political will to fix or even acknowledge that mistake yet: they'd rather just throw vast amounts of money away propping the mistake up so they can carry on a bit longer. Like the ultra-expensive short term loans all over the UK, they rarely if ever make things better in the long term - just delay problems a bit, while they grow faster than ever before.

The way it has been explained to me, these loans were also sold on which created a lot of problems/

[js207]

The way it has been explained to me, these loans were also sold on which created a lot of problems/

That helped insulate the original issuers from the consequences of their bad loans, yes - indeed, that was government policy too, the very raison d'etre of Fannie Mae and Freddie Mac, between them holding five trillion dollars of mortgages. Senators Hagel and McCain urged caution and drafted legislation to rein it in, but instead its lending standards were weakened in 2006 to expand it into sub-prime loans. http://www.washingtonpost.com/wp-dyn...802111_pf.html