Ed State

An Open Letter to Congress on the $700B Paulson Bailout Plan

Guys, the *root* cause was Clinton's insanely aggressive "minority home ownership" quotas of the early 90's, essentially forcing banks to abandon age-old SELF-IMPOSED credit risk limits. Freddie & Fannie were then quickly rejiggered to "back" the resulting subprime loans. The Glass-Steagall repeal was passed by congress 90-8-1 in '98, which allowed the securitization of the bad paper, finally getting it off the banks' books. But what you call the "root cause", Greenspan overly ducking the fed rates (whetting the world's appetite for mortgage CDOs, in lieu of decent US Bond returns), was merely the final, high-level agitator.