Here is the breakdown for you like a fraction:
1. The current economic crisis was caused by the housing bubble.
2. The housing bubble was caused by subprime mortgages to low income and bad credit borrowers.
3. Jimmy Carter and the democrats passed the Community Reinvestment Act (CRA) which gave incentives to banks to help low income borrowers get a home. (That was a good thing)
4. In 1995 the Clinton Administration added new provisions to the CRA which forced banks to offer $1 trillion (I don't even know how many zeros that is!!!) in new subprime loans and created subprime mortgage backed securities or face severe penalties thus forcing neighborhood banks into predatory lending (Why? Because they focused on low income bad credit types)
5. Fannie Mae & Freddie Mac (Government Sponsored Enterprise - GSE) added fuel to the fire by guaranteeing these loans (oh, boy!) bundling and selling on Wall St. (pretty darn profitable).
6. More mortgages meant more money for Fannie & Freddie so they wanted to increase the number of mortgages (greed) but how? They lowered the bar... moved down the income scale with "affordable mortgages" in the form of Variable rate, interest only, option arm, stated income, no money down loans.
7. Bustling activity in the housing market with the influx of new buyers (who would not have normally qualified) more demand than availability forcing prices to skyrocket (remember, Econ 101 law of supply & demand)
8. Then the variable rate loans reset and interest rate increased, gas prices shot up (because America is addicted to foreign oil), paychecks are squeezed and people stop paying, banks stop lending, subprime market collapses, foreclosures pile up, no buyers (remember subprime is dead) only seller, housing prices fall, more buyers stop paying (because they realize that their loan is upside down and it's cheaper to rent).
9. Fannie's guarantee is worthless, why -- because they overstated their assets!!! (These criminals to be discussed later)
10. Banks closed due to worthless gov't backed securities, jobs are lost and here we are.
11. Why is the expansion of the CRA to blame? Because prior to CRA expansion (Clinton Admin) home prices increased with inflation afterwards home prices became unhinged from inflation (see #7) causing housing prices to rise too fast and reckless speculation. A bubble waiting to burst.....
12. This could have been avoided in fact in 2003 Pres. Bush tried to stop it and the dems blocked him and in 2005 Sen. McCain co-sponsored a bill (The Housing Enterprise Regulatory Act of 2005) which would have stopped it but the dems blocked that too. Who? Barney Frank (D-MA) and Melvin Watt (D-NC) to name a few.
But I know the naysayers don't believe me so I can't resist showing you the proof:
13. See, Fannie had friends in the Senate -- Chris Dodd (received sweet heart loan from Countrywide), and Barack Obama.
14. Jim Johnson who just happened to be the CEO of Fannie when CRA was expanded, improperly deferred $200 million in expenses and Fannie Mae under-reported his compensation originally reported at $6-7 million but was actually $21 million (avarice and corruption at it's best) oh, this is the guy that Barack Obama chose to pick his VP and he gave Obama the maximum donation of $4600. He now works for Goldman Sachs which gave Barack Obama $700,000 and raised another $500,000 through bundling (It pays to have corrupt friends doesn't it?)
15. Barack Obama has another friend Franklin Reines who he receives housing advise from who also happened to be the Vice Chairman of Fannie when CRA was expanded (Do you smell something rancid here?) Reines also received a sweet heart loan and resigned from Fannie due to accounting irregularities with a $25 million dollar golden parachute.
16. Barack Obama received more campaign money in just 3 years than John Kerry did in 20 years from Fannie & Freddie. He received 49 times more than John McCain. (Would you like to take a guess why? I guess calling for more regulation doesn't pay, huh)
17. Barack Obama also worked for Miner, Barnhill & Galland which sued banks (CitiBank being one of them) for not issuing enough subprime loans.
18.Neither poor people, the free-market, or deregulation caused this. A bad government regulation caused this, self-interested lawyers caused this, greed and stupidity on wall street caused this, and bad social engineering caused this creating an environment and the wrong incentive (CRA) which forced banks into predatory lending and set low income families up for failure. That's not hope and that's not change that's cruelty.
Barack Obama's friends caused this; the political philosophy to which he ascribes caused this. He has the audacity to lecture the country on failed economic policies! This is not change it is more of the same. It is hypocrisy -- It is hope-o-crisy!