Without question, government intervention into the credit markets gave rise to distorted risk assessments. How many of these misrepresentations of debt quality resulted from stupidity and how many from intent is another story, but certainly, the government pushing and then backstopping these mortgages created an environment that was fertile territory for a mortgage bundle and derivative con game.
So many people continue to insist that government deregulation caused the credit crisis, when that's false. These securities were all regulated. For those who bought them, the role of the government
-sponsored enterprises was a big part of what made them seem safe.
This was not Wall Street evading government supervision, this was Wall Street buying partners in government who then looked the other way.
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