re: America's housing policy: The definition of insanity

The federal government, especially under the Obama Administration (or any progressive, really) wants to raise homeownership rates. The only way to do so is to loosen credit requirements for mortgages. But... the government doesn't issue mortgages.

Banks want to increase lending, cause that is how they make money. Banks want to make loans. The only thing banks want more than making loans, is to sell those loans forever. The threat of having to buyback bad loans is stronger than the income from making loans. In a perfect world, banks could make all the money, but not have any of the risk - the risk would be borne by others - such as the government.

Realtors want to sell houses. Most people can't buy cash for a house, so they need lending to do so. Loosening credit expands the pool of potential buyers.

Realtors and banks have very, very good lobbying groups, and make lots of campaign contributons.

If banks, realtors, and government all have aligned goals - loosening of credit - yes, it is going to happen. And in 6 - 8 years when it all goes to hell again, Obama, the bankers, and the realtors will all be retired, and it will be someone else's problem.