
Economists’ Faith in Markets Broke America - henrik_w
https://www.theatlantic.com/magazine/archive/2019/09/nicolas-lemann-binyamin-appelbaum-economics/594718/
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ralusek
Banks were subsidized or required by the state to issue subprime mortgage
loans to the poor; people with terrible credit who would have no chance of
actually paying the loan back. The Federal Nation Mortgage Association would
then give banks guarantees that they would buy the loans from them if they
needed funds. So these terrible loans that no bank would ever issue were
suddenly considered to be a reasonable investment, because the federal
government would just buy them out. Something very similar is currently
happening with student loans. This is why lenders will gladly loan 90k to
somebody to major in Gender Studies, where the major itself provides very few
financial prospects for the loan being paid back.

That system is not "markets." That system is the federal government saying
"Americans need to be homeowners and Americans need to be college graduates,"
with no consideration for whether or not the loans will ever be paid back. So
then of course banks will say, "uhh, okay, ya I'll give you a loan. The
government has my back."

And then when all the people failed to pay back their mortgages, the banks get
"bailed out" for doing shitty loans...but they were "bailed out" from the get
go, that's literally WHY they issued the loans in the first place. People will
say "oh look at these free market capitalist looking for social welfare," but
again, these loans were only issues as a means of actual social welfare for
the poor, subsidized by the federal government.

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toss1
That may be a piece or the seed of it, but no govt forced the lenders to
generate fraudulent loans at scale or to then repackage those loans into
securities and massively mis-rate the risk of those securities -- both of
those activities done at massive scale (along with CDOs and other shenanigans)
is what collapsed the banking system.

~~~
Gibbon1
A lot of it was break down of originating standards, rating fraud, and
worthless insurance on as you said CDOs and other shenanigans. All the people
responsible get protected and 10-20 million people lost their homes.

Worse the employment to population ratio dropped 10% and has stayed there
since.

