In New York Times' front page article, January 4, 2010, captioned "Lax Oversight Caused Crisis", Fed Chairman Bernanke is quoted as saying "Borrower's chose, and were extended , mortgages that they could not be expected to service in the longer term." Bernanke concluded that poor underwriting ( think NINJA/no docs loans ) and lax regulatory supervision ( the rules were there , just not applied ) was the cause of the housing bubble that lead to the financial panic which in turn lead to the real recession we are suffering through.
Likewise according to the Financial Times the same day, Bernanke said "exotic new mortgages and lending to borrowers who could not hope to repay their loans were the chief causes of the sharp increase in home prices that ran from the late 1990's until 2006 and whose collapse hurt millions of Americans."
With all due modesty , I believe that was what I said in my first posting about subprime loans being the spark that set off the conflagration. Of course we could both be wrong.
Now if he will just tell us why that was allowed to happened. Why didn't the government crack down on this kind of irresponsible lending? My theory is that it was more than just greed, although greed certainly played a part.
Eric
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