Subprime loans and the securitization of such began long before Bush was elected:
In 1995, the Community Reinvestment Act (CRA) was revised to allow CRA mortgages to be securitized. In 1997, Bear Sterns was the first to take advantage of this law.[73] Under the CRA guidelines, a mortgage issuer receives credit for originating SUBPRIME mortgages, or buying mortgages on a whole loan basis, but not holding SUBPRIME mortgages. This rewarded issuers for originating SUBPRIME mortgages, then selling them to others who would securitize them. Thus any credit risk in SUBPRIME mortgages was passed from the issuer to others, including financial firms and investors around the globe.
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Increasing home ownership was a goal of the Clinton and Bush administrations.[83][84][85] There is evidence that the Federal government leaned on the mortgage industry, including Fannie Mae and Freddie Mac (the GSE), to lower lending standards.[86][87][88] Also, the U.S. Department of Housing and Urban Development's (HUD) mortgage policies fueled the trend towards issuing risky loans.[89][90]
In 1995, the GSE's began receiving government incentive payments for purchasing mortgage backed securities which included loans to low income borrowers. Thus began the involvement of the GSE's with the SUBPRIME market.[91] SUBPRIME mortgage originations rose by 25% per year between 1994 and 2003, resulting in a nearly ten-fold increase in the volume of SUBPRIME mortgages in just nine years.[92] The relatively high yields on these securities, in a time of low interest rates, were very attractive to Wall Street, and while Fannie and Freddie generally bought only the least risky SUBPRIME mortgages, these purchases encouraged the entire SUBPRIME market.[93] In 1996, HUD directed the GSE that at least 42% of the mortgages they purchased should have been issued to borrowers whose household income was below the median in their area. This target was increased to 50% in 2000 and 52% in 2005.[94]
en.wikipedia.org
Financial deregulation preceded the Bush presidency too. Clinton counted financial deregulation as one of his accomplishments.
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