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in the 70's with the creation of the "Community Reinvestment Act". The following is an excerpt from "The Australian" online Newspaper of the year: SOME milestones in the prehistory of the crisis. 1933: As part of the New Deal, investment banks are stopped from also acting as commercial banks (which would have given them bank deposits and more stability). 1938: As part of the New Deal, president (Franklin D.) Roosevelt creates Fannie Mae and in 1970 Congress creates Freddie Mac. With their implicit government guarantees they can offer cheaper loans and expand until they dominate the American mortgage market. 1989: The American government step(s) in and pay(s) for the savings and loan crisis, which sets a precedent. 1995: The Community Reinvestment Act is revised so that banks and thrifts are forced to give home loans to low and moderate-income households as well. In return they are allowed to repackage and sell those sub-prime risks to others, which Bear Stearns pioneers in 1997. 2001-03: Instead of letting the market get rid of bad businesses and loans after the dotcom bubble and 9/11, the (Federal Reserve) reduces its rate from 6.5 per cent to 1 per cent (with) a dramatic expansion of the money supply, which creates a real estate bubble. Again we see government ignoring the forces off the free market and trying to establish a synthetic form of market that will never work.

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