What this means was highlighted by Bernanke at hears this week: home loans were made with no effort to demonstrate that folks who received the loans could support the financial commitment. The bad paper that resulted was bundled and resold and once the lack of real equity was determined the bubble burst as should have been expected. This kind of feel good manipulation of capital markets by politicians historically falters and drags all the good paper down with it. The economics of housing were well established and the rising tide lifted all boats that made economic sense. There will be little or no progress in home ownership until genuine market forces are reestablished. This is of course basic Econ 101.
What this means was highlighted by Bernanke at hears this week: home loans were made with no effort to demonstrate that folks who received the loans could support the financial commitment. The bad paper that resulted was bundled and resold and once the lack of real equity was determined the bubble burst as should have been expected. This kind of feel good manipulation of capital markets by politicians historically falters and drags all the good paper down with it. The economics of housing were well established and the rising tide lifted all boats that made economic sense. There will be little or no progress in home ownership until genuine market forces are reestablished. This is of course basic Econ 101.