“No, the economy collapsed because government policies mandated insane lending practices to encourage home ownership for undeserving people (0% down)... The house of cards collapsed because of gov’t mandates.”
That sounds like the Rush Limbaugh Subprime Theory.
Unfortunately for Rush’s theory investment banks and pure mortgage lenders were not covered by government mandates. The CRA regulated only deposit-takers. The CRA-free shadow-banking system issued trillions of dollars of subprime paper because it was immensely profitable, not because anyone was twisting their arm; no one was.
Rush’s government mandate theory also has a problem with the fact that the bubble was global, and not just confined to America. Had it been the result of American regulation this would not have been the case.
In fact the origin of the bubble was some financial engineering cranked out by quants back in the 1990s. Specifically it was David Li’s Gaussian copula function, a pricing model with a flaw that was ignored by everyone using it, at least until it blew up the financial markets.
The banks had redlined bad loan areas, and the gov’t forced this to end. 20% down was deemed racist. Once banks were Mau-Maued into granting these 3% loans, the financial system did it’s thing... Capitalize on the system. The enormous drive to profit figured out by many will always trump the controlling rules of the few elites.