Deregulation?

The banking industry was doing a fine job until the courts and government stepped in and changed the rules. There is not one single thing that one can point to and say that is what caused the Banking problem. It was a series of problems building on each other. Many will point to the Community Reinvestment Act of 1977 which outlawed the practice of Red Lining (Real Estate sales people would draw a line around a neighborhood and would not sell houses in that area)in the Bank issuing of credit. At this time banks required a 20% down payment and required you to have an income of between 25% to 30% of the value of the mortgage. When the Bank Examiners came one of the things they looked at and rated a bank on was the number and amount of loans issued to low income people. As property values increased, because of the increased demand for housing, people were having trouble coming up with the 20% down payment so government regulations allowed for the sale of Mortgage insurance which a person would pay more interest and get the down payment lowered to 5%. Some say this is what led to the Savings and Loan crisis. Along the way Fanny and Feddie were allowed to buy up mortgages and package them in bundles and sell them to Investment banks and Investment funds. These loans were considered very good because they were backed by Real Estate. As the Government followed up with a cheep money policy (keeping interest rates low) the demand for housing increased and values increased. Banks were allowed to loan interest only loans and Adjustable Rate Mortgages which when adjusted the rates put the monthly payment out of reach for the homeowner and forced into foreclosure. Government tried to do social engineering and the Banks kept offering a product because the government was backing the loans. The combination along with politicians trying to use government money and programs to get reelected lead to the current crisis.

It's not so much a regulation/deregulation issue, as it is an issue where the federal government screws up everything it sticks its nose into. The bank crash happened because asinine politicians and organizations like ACORN came up with this idea that poor people deserve houses. Poor people, wanting something for free, jumped all over this. The government then pushed banks to give home loans to these people who couldn't possibly make the necessary payments on the homes. Now banks would have never done this without the government getting involved. Even the dumbest banker would know that giving loans to high risk people in large numbers is a recipe for disaster, but hey, the government told them to do it, promised to have their backs, and then we had a crisis in the making. The problem is, you can't just loosen regulations and then support bad practices with taxpayer dollars. If they'd loosened regulations and let banks do business as they'd been doing for a while, this foreclosure mess wouldn't have happened because those people would have never gotten houses they couldn't afford.

I had just started a deregulation question not similar to this one but. I thought with the deregulation of electric companies one would be able to go out and purchase there electric gas what ever thru a company of there choice. now I am being told I can't due to a local municipality we have that negotiated a 30 year contract with an out of state electric company that states every resident in the city I live in are required to use them. How is this deregulation of powers? sorry if its off topic.