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- Aug 10, 2005
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It was more a lack of enforcement of proper accounting standards (obviously aided by the (legal/legislative leverage) via their extensive lobbying and gift giving to influential congresspersons (on both sides). Let's not also forget the subsidies handed out by the federal government to companies to help provide low-income families with housing, encouraging more risk taking. It was a bubble, and the over-invesment was worsened by government (and aided by their inability to enforce current accounting standards).
That could be part; an argument can also be made that it was systematic which had developed in which the risk for bad mortgages was passed from the folks making the mortgage (brokers) to the folks buying them (ie financial institutions). The brokers had no incentive to make good loans; they got their fee and sold the mortgage. The financial institutions made a lot of money on them short term; no one considered the long term ramifications.