Via Atrios…  The propaganda in the kook pews these days is the economic collapse was caused by liberals forcing banks to make mortgage loans to poor people.  As Eric Hoffer once said, propaganda doesn’t fool people, so much as allow people to fool themselves…

Under pressure, US eased lending rules

WASHINGTON – The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents.

"Expect fallout, expect foreclosures, expect horror stories," California mortgage lender Paris Welch wrote to U.S. regulators in January 2006, about one year before the housing implosion cost her a job.

Bowing to aggressive lobbying — along with assurances from banks that the troubled mortgages were OK — regulators delayed action for nearly one year. By the time new rules were released late in 2006, the toughest of the proposed provisions were gone and the meltdown was under way.

"These mortgages have been considered more safe and sound for portfolio lenders than many fixed rate mortgages," David Schneider, home loan president of Washington Mutual, told federal regulators in early 2006. Two years later, WaMu became the largest bank failure in U.S. history.

The administration’s blind eye to the impending crisis is emblematic of a philosophy that trusted market forces and discounted the need for government intervention in the economy. Its belief ironically has ushered in the most massive government intervention since the 1930s.

Emphasis mine.  And…what was the trigger for that previous spurt of massive government intervention in the economy?  Oh…right…  The Great Depression.  Much of the regulation that republicans have been fighting tooth and nail to eliminate was put in place in the 1930s, to prevent another one of those.

"We’re going to be feeling the effects of the regulators’ failure to address these mortgages for the next several years," said Kevin Stein of the California Reinvestment Coalition, who warned regulators to tighten lending rules before it was too late.

Many of the banks that fought to undermine the proposals by some regulators are now either out of business or accepting billions in federal aid to recover from a mortgage crisis they insisted would never come. Many executives remain in high-paying jobs, even after their assurances were proved false.

That needs to be fixed.  I know a lot of folks are absolutely against the bail-outs.  But if massive portions of the economy suddenly go dark we’ll be a decade or more digging our way out of this.  But in exchange for…oh…not going to jail…the people who are responsible for this mess should at least loose their jobs.  If train-wreaking the world economy isn’t incompetence then what the hell is?