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> To keep investment rates high, the Fed coordinated changes to regulations so that private mortages could be sold as investments. This is just factually wrong
by snowwrestler 8y ago
> To keep investment rates high, the Fed coordinated changes to regulations so that private mortages could be sold as investments.
This is just factually wrong. Private mortgage securitization has been legal in the U.S. since at least the 1970s. Most of the subprime-mortgage-backed securities that failed in the crisis were not even subject to regulation by the Fed because they were funded and securitized by private funds and investment banks (the Fed only had jurisdiction over commercial banks at that time).
- notveryrational 8y agoWas talking here about the regulatory requirements for mortgages to be accepted in the first place as well as the rather lax regulatory regime (in practice) that was in effect at the time. Yes, Glass-Steagall's removal of the separation between depository and investment banks had its own effects.