Capitalism

[Thomas M. Miovas Jr.]

Now, my only objection is the example of BB&T - they didn't get involved. Was that because, although being a big bank, they weren't big enough to need to get involved in that silliness? Or is it something else?

Whether or not a given bank had to deal with the Community Reinvestment Act depended on a lot of factors, one of which is was it located in a run-down area and giving loans out to those people. I don't know BB&T's situation, in that regard, but they didn't go whole-hog in setting up investments that were bound to fail. They even put out a press release that said if banks were as well run as they were, then they wouldn't have been suckered into the mess (I'm paraphrasing); so certainly, some banks and financial institutions could have avoided the meltdown. However, since the mortgages seemed to have been backed by the US Government via Freddie and Fannie, some banks and investment firms continued to think that the housing market would never come down and based all of their policies on that proposition. So, yes, they might have been able to avoid a total meltdown, but they did get wrong information from the government and it's semi-private sector agents. And by the time some of them found out the market was going sour, they couldn't get out of their contracts to avoid the shambles, especially with regard to mortgage backed securities (some of which had clauses going out 20 years). And since the market was doing so well for fifteen years, projecting that it was going to continue to do well for another twenty years seemed reasonable at the time, even though some people probably weren't think too much about it due to the artificial demand.

[softwareNerd]

... a conglomerate of government policies ... trying to chase away the hangover with more booze, ... The investors that got involved did so because they were fed bad information about how good the economy was doing, thanks to the cocking around with the the Interest Rates and supply of money.

While probably true, this does not answer really your question, because one would have to ask why investors who have decades of boom-bust history to contemplate cannot see some signs of a government-triggered boom.

Now, my only objection is the example of BB&T - they didn't get involved. Was that because, although being a big bank, they weren't big enough to need to get involved in that silliness? Or is it something else?.

With all such boom/bust cycles, in retrospect, some people were predicting bad things years ahead, others just recently, with an increasing proportion predicting problems as the peak approached. For BB&T, I don't think it is size as much as where they stood on their willingness to take risks. For instance, Wells Fargo is a much larger bank, but they too were wary of the newer and riskier parts of the market.