so home prices are going to plummet, page-46

tcisboss and passive - yes, I am saying that the government had a role in this - the US government in this instance, not the Australia government, but a government none the less. They didn't say go forth and create CDOs, but they help put together the conditions to allow it to happen. They wanted to do good, or at least be seen to be doing good. And what could be better than having people who could not normally afford to buy houses become home owners? To do this they needed to remove the risk of lending to people who could not afford to pay the loans.

Why would a mortgage broker care if the loan couldn't be repaid? He passed the risk on to the bank. Why would the bank care that the loan couldn't be paid? They were passing the risk back to the government. The government didn't care, they were seen to be doing good, and they certainly didn't take on the risk of the loans.

You could argue the toss as to whether or not the government thought it was doing good or just trying to get reelected. The story ends the same. There were unintended consquences for what they did. And that is what worries me about this current problem. Its the government trying to correct a problem and think it is likely that the cure may even lead to more problems. It may not, but I would not take it at face value that since the government is doing it it will help. I have even less faith in this government to do the right thing even if that was what they wanted to do - and I don't even credit them with that.