Had Moody’s, Fitch, and S&P NOT rated those bonds as they did, there would have been no money in the system to be making loans, and they would have faced a discrimination suit for disrupting funding for housing to said minorities. The fact that borrowers could not (or would not) repay loans was entirely irrelevant; what WAS relevant was bloated statistics showing more minorities to be homeowners than ever before.

NOT providing a high rating, with these mortgages being backed by the UNITED STATES GOVERNMENT, would have screamed loud and clear to investors across the globe: DO NOT INVEST IN THE US GOVERNMENT, IT IS JUNK.

That obviously would have had a far more disturbing result – and on a lot shorter time line than the current failure.

Regardless, they cannot get it through their heads that the more they fiddle, the worse the outcome. It’s not a difficult concept to grasp, that the market is inherently self-correcting and external manipulations (over-regulation, subsidizing an industry, over-taxation, wage controls among others), leads to ever harsher – yet completely predictable – corrections.

What’s worse, they seem to believe money really DOES grow on trees. If the junk backing the bonds had been declared as such, no investor would have touched it with a 90-foot pole; but they think that money’s still there for the grabbing?

Discrimination based on the ability to repay a loan is not illegal discrimination. Many recent college graduates, especially the ones with degrees in areas like “theater management,” probably can’t qualify for a mortgage regardless of race or gender.

The problem arose when Congress stuck its nose into the issue first with CRA and then with the notion of “affordable housing” and lowered mortgage underwriting standards via Fan and Fred. All of that came with the threat of prosecution for redlining — and the promise of federal government backup in the event the mortgages went sour. We can see how well that worked out.