The predatory lending was a part of the problem, but not the main problem.<quoted text>
A Laissez Faire economy would develop a ruling class. No one said regulation wasn't necessary. Regulation being policing fraud, theft, misrepresentation, not take part or run the economy.
The one thing the government was supposed to do with the housing market was to regulate or police fraud and misrepresentation. Instead, the government allowed for conditions that were ripe for predatory lending and took an active part in the market through Fannie Mae and Freddie Mac.
Wall St. knew there would be a government safety net and became reckless. Instead of people going to jail, they got a government stimulus.
The larger cause was DEREGULATION. Once CDOs and MBS's were deregulated, banks could bundle good and bad mortgages together for resale with no oversight.
Even worse was the lack of regulation overseeing the rating agencies. How Moodys and S & P could give MBSs AAA ratings, knowing full well they were bad invenstments is just ridiculous. They need regulating!
Nobody has gone to jail for any of this blatant corruption because the SEC enforcement division was shrunk to an ineffective size under W's republican congress. Half of what happenned was no longer even illegal due to deregulation. Obama has dropped the ball on prosecuting the few people he could have!