I think it was Charles Krauthammer who said "I began to sense we were in trouble when my barber was bragging about buying her fourth investment property with no money down."
It was Barney Frank and his ilk who took us down the path of no return when they decided that we needed to make home ownership available to all. When the po' folks couldn't meet the underwriting standards, underwriters did the only thing they could- first loosened the standards, and when that didn't work, did away with them entirely, giving rise to the "liar" loans (also referred to as NINJA loans- "No income, no job or assets").
The investigation of this mess is actually pretty easy- you grab the loan applications (prepared by the loan officer after interviewing the borrower), look under "Miscellaneous income", and ask the borrower about it. His response will be "I have no idea how that got in there- I sure didn't do it." Loan officer simply put in the income number needed to make the loan work. "Gee- what could possibly go wrong" with that program?
You can't really fault Wall Street for what came next- they "creatively" packaged the loans so they would sell (after all, they were just helping the gumment move in the "new direction" of universal home ownership). Did get a little dicey, though, when they started short selling the packages (ie, betting they would fail).
But shouldn't it be the job of the guvment to police these things? It was the gumment that threw down the gauntlet and allowed all this foolishness in the first place- can't really blame Wall Street (the last bastion of pure capitalism) if they went along with the program (and figured out a way to make money from it).
Wouldn't break my heart if we were to hear that dear ole Barney had met his unfortunate demise as a result of drowning in his own spittle. . .
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