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Response to Yo_Mama (Reply #17)

Tue Aug 13, 2013, 05:31 PM

42. Feedback loop.

Push for redlined people to get loans.

Small lenders need to offload mortgages so they can loan more. Create CDOs. Mid-'90s.

Still need more redlined people to get loans, but most "redlining" is economic and not racial--the correlation isn't causation. So we push for lower eligibility standards.

Subprime loans made more common. They get fed into CDOs.

Fanny buys them to get the banks more money for more loans.

Private banks say, "Wait! We can do CDOs! The stock market's tanked, we have lots of cash! Buy CDOs."

There's even *more* money available to banks for mortgages and subprime loans.

Fanny sees that the mortgage business is taking off and it's losing market share. Late in the game, it vastly increases subprime buying and issuance of CDOs.

Problem 1: Collateralizing mortgages without more stringent safeguards. This was by 1995.

Problem 2: Pushing for lower-eligibility buyers to get loans because low-eligibility/minority wasn't taken as correlation, but as primarily focused on race.

The rest is just people doing what they think they can make money at. That includes Fanny.

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