Congress was creating a monster because most people started to believe that home prices increasing 10% or more every year was the new norm and, more importantly, that the risk was all but removed in housing. That's the real crime, creating a perception that the risk was gone.
How do you create a perception that risk is removed? You continuously increase the lending capability of Fannie and Freddie while simultaneously increasing the percentage of subprime loans over a decade. After a while, it becomes normal and expected. Add in congressional leaders including Barney Frank giving speeches that we're not in or creating a housing bubble and you complete the package.
Barney Frank is perhaps the greatest in-office politician, demonstrating extraordinary skill in performing the "Washington two-step" and deflecting blame from him and Congress. He didn't act alone, but he was in leadership, and if we don't learn from this lesson, we are doomed to repeat it.
At the time of publication, the author had no position in any of the stocks mentioned.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.