While that is true, this article paints the relaxing of mortgage standards as the culprit. It was not. If people had continued to have jobs, they would have been able to pay the mortgages. The REAL CULPRIT was the oil price shock.
We've done precious little in 40 years since the last oil price shock to avoid the devastating effects on our economy from oil prices. Mortgage failures are the symptom, not the cause. And Mortgage failures occur in almost every economic downturn, frequently causing the economic downturn to be termed a "real estate bubble" when it's not really.
“If people had continued to have jobs, they would have been able to pay the mortgages.”
The point is many people didn’t have jobs that would have allowed them to buy a house or even if they did they didn’t pay their mortgage (& never planned on paying it). That is why they weren’t credit worthy to begin with!
While I think derivatives were a joke and legalized gambling for the banking industry and the main cause of the problem, I have wondered where all that excess cash from the run up in oil prices went, not only from the U.S, but from around the world. It had to have a major effect on all economies.
Banks were forced to lend to people who had almost zero ability to pay back their loans. It drove the prices - and RISK of owning a home - up... waaaay up. Free money caused other mini-bubbles... and now - years later - here we are with the mess caused by idiot democrats...
While sounding correct, there may be no data to support that contention.
The government does not keep an official statistic on the number of homes in foreclosure or repossessed by banks and lenders. Instead, the generally accepted numbers on foreclosures are kept by the Mortgage Bankers Association. That is the national association that represents the mortgage banking industry, and most importantly has only tracked foreclosures since 1990. Therefore causal factors originating before that date, and in reference to your contention regarding "oil crisis", are not proved.
A more likely causal relationship exists between relaxiation of bankruptcy regulations and foreclosures.
“While that is true, this article paints the relaxing of mortgage standards as the culprit. It was not. If people had continued to have jobs, they would have been able to pay the mortgages. The REAL CULPRIT was the oil price shock. . . . Mortgage failures are the symptom, not the cause. And Mortgage failures occur in almost every economic downturn, frequently causing the economic downturn to be termed a “real estate bubble” when it’s not really.”
I don’t think this is correct. Economies will always have “shocks.” Oil prices, Katrina, 9/11, inventories too high . . . etc. Badly overleveraged economies respond badly to shocks because the shock starts a process of deleveraging. Deleveraging begets more deleveraging. But a non-bubbly economy takes a little hit and starts growing again.
So the “cause” may be the “shock.” But the difference between a quick recession and a depression is the amount of leverage. By that measure, relaxing mortgage standards was a very big deal and a major contributor to the mess we have today.