Here are the political/governmental poor decisions that led to the crash
The secularization of these, required by CRA, poison pill mortgages (needed to mitigate the banks’ risk incurred by making them) coupled with the repeal (1999) of the Glass Steagall Act made the crash almost inevitable. Both of these truly horrible decisions were made by politicians for “the greater good” of their constituents, either donors or stupid voters.
The idiotic “derivatives” that were invented to shift more of the risk to investors and the “credit default swaps” designed to insure the investors in these instruments were actively encouraged by the SEC, which is a government agency charged with protecting the public not the banks.
Certain Politicians who claimed responsibility for the CRA kept insisting that everything was working perfectly well while the system was snowballing down the hill.
Others were siding with the biggest bundler trying to capture control of the sub-prime market.
After the bust, the perpetraitors (sic) used it to turn on the small banks in order to protect the larger banks that had gambled and lost at the politicians urgings and assurances by constructing a huge barrier to entrance for new banks and onerous, costly reporting requirements the cost of which will cause many small banks to close. That will lead to larger banks being free to charge higher fees resulting in larger campaign donations or favors.
Now, I told you, that to tell you this,
The problem is that the politicians forced bad loan origination on the banks in a ponzi like quota system and paid some Clintoonite bureaucrats some fantastic bonuses to flood Fannie Mae with bad loans.
Jamie Gorelick served as vice chairman of the Federal National Mortgage Association (Fannie Mae) when the government-sponsored enterprise began bundling subprime loans into securitized financial instruments. Her compensation was a salary of a little over $500,000 and $26,000,000 in bonuses. But Gorelick is perhaps best known for her 1995 memo, written when she was deputy attorney general for Clinton, that later became known as “Gorelick’s Wall,” a policy prescription limiting the flow of information between intelligence gatherers and criminal investigators that some believe helped allow the September 11, 2001 attacks on the World Trade Center to go unchallenged. (And often alleged to keep the FBI from learning what the CIA knew about Clintoon’s missile technology dealings with the Chinese.)
Franklin Raines the former chairman and chief executive officer of Fannie Mae, who served as White House budget director under President Bill Clinton. His Compensation was $700k salary, $50 million bonuses. He was specifically named in the Securities Exchange Commission’s lawsuit against Fannie Mae and settled for by paying the SEC $24.7 million, so he wound up in about the same financial position as the other Clintoonite.