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Politics : Formerly About Advanced Micro Devices
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To: Broken_Clock who wrote (568781)5/29/2010 11:55:01 AM
From: combjelly1 Recommendation  Read Replies (1) of 1578731
 
"total bs. I seriously doubt you even have any idea what caused the housing bubble."

Uh, if you think it is total BS, the odds are you are the clueless one. This is strengthened because you seem to feel that the housing bubble was the only problem. It wasn't, it was just the fuse that kicked off the whole mess. Anything could have done that, up to and including a crisis in credit cards.

The heart of the problem was the wide scale marketing of asset-based securities and its brother, credit default swaps. Asset-based securities and its relatives allowed debt to be bundled, securitized and marketed as investment vehicles. The CDS allowed the risk to be hedged. Because of the perceived low risk, they were very popular. To the point that demand outstripped supply. This gave non-bank banks,who didn't have the same degree of regulation, the incentive to issue loans to anyone who could fog a mirror. Why not? They could sell it off for a profit and still get all of the commissions. No risk and all gain. And, if they had some idea their bundles were really not good, they could then buy a CDS on it and bet on its fairly. Goldmann Sachs was an expert on this. Congress and the administration pushing for an "ownership society" only sweetened the pot.
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