You’ve told me nothing I did not already know.
Now, please tell me who, in the government or ACORN, put guns to the heads of the “...bunch of people who couldn’t really pay their mortgages because they were too poor to start with..” and FORCED them to take out these mortgages.
The only thing worse than stupid people making their own decisions is bureaucrats making decisions for them, because the bureaucrat cannot learn from his mistake.
So, we had a bunch of stupid people making decisions. Whoops!
For example, the house I bought last summer was previously “owned” by a nice retired divorced school teacher. She talked her son / builder / real estate agent (all the same guy), into building her a dream home on her family’s historic land here in Southern Oregon.
Well, she bought the .44 acre lot for about $425,000. It has a nice view, but not that nice. He built her a $250,000 house, taking no margin, and doing a really nice job. It is an excellent house. By the time they were finished, the retired school teacher with her little pension and social security had a loan for $670,000 on the house. That was the top of the market.
When we met her, she was eating cat food and wearing sweaters because she couldn’t afford to heat the house. Monthly loan payments were probably around $3,400, more than all her combined, fixed, income.
Whoops!
And this was a school teacher. Tells you something about the quality of edumacation in Oregon.
So, she was listing the house for $600K, knowing she would take a bath. It didn’t sell for a year, because the housing market was falling apart.
So she reduced the price to around $525K, at which point we showed up. We dickered down a little, and after a whale of a lot of pain, the banks took the loss ($670 less $5XX) and she walked away.
Repeat with variation across millions of homeowners.
Now, each of those people had to make a few stupid decisions. But what lead them to believe that they should ignore all history and guidelines and buy excessive housing? The bubble. What started the bubble? The factors I explained.
Once bubbles begin, they are self-inflating. “Popular Delusions and the Madness of Crowds.” Tulips. Internet stocks. Ponzi schemes. Pyramid schemes. Many foibles of the human critter are repeated regularly.
This particular one could not have started (IMHO) without the factors I point to. My retired school teacher was just the last one to the party. Was it her fault she bought too much house? Sure. What convinced her that it might make sense? The bubble created by the Fed.
IMHO.