[ben509]

And the democrats fought tooth and nail to prevent corrections for that decade because those policies, in the short term, appeared to help their constituents. They wanted to get lots of new homeowners homes, but those homeowners often found they couldn't afford the mortgages in the long run, which is exactly why the banks hadn't been making those loans prior to government meddling. Those mortgage problems were, naturally, exacerbated by the fact that lots of additional demand drove up home prices.

For the exact same story, see the ongoing student loan debacle.

[mhneu]

That’s not the story I heard from the finance people who were setting up the securitization.

I agree with your broader point: government policy is complex, we need a regulated market system because completely free markets don’t work, so we need a high skilled government that tries hard to get things right — and a legislative system that cares about the government functioning well.