It doesn't take a Ph.D in economics to determine that if you demand banks make mortgage loans to people who don't meet normal lending criteria, the banks will be making lower-quality loans and more of those loans will go into default.That's not what happened. Government can't make Wall Street act against its own self-interest.* If Wall Street didn't want to make low quality loans, they would not have made them. They in fact made them because of credit default options--STRICTLY a Wall Street invention--but not invented as a result of government initiatives to increase home ownership. CDOs were invented to earn more money for Wall Street.* Right now, the guidelines for Agency loans are pretty straightforward. "Send us X, Y and Z and we'll reimburse you for your loan." But banks now have "overlays" that increase the amount of paperwork required by banks above and beyond what's required by the Agencies. Again, no one can make Wall Street act against its own self-interest.