Reply #7: I Wondered Myself... [View All]

...so I did a little research, and Congress passed a law in 1999 that reversed Glass-Steagall, which is the legislation you're speaking of.

That's one of the reasons we have this mess. The banks used to be forbidden to take depositors' money and invest it in risky ventures like CDOs and hedge funds under the old law.

Now, they could offer a mortgage to anyone who an fog a mirror because they knew they'd never keep the loan on their books. If you're gonna sell off the loan to the Chinese anyhow, who cares if the homeowner can't pay?

This is going to change. When it does, all these inflated real estate prices will adjust to the mean.

They have to. There's no way out of it.