“Three hundred million Americans, their lending institutions, their government, their media, all believed that house prices were going to go up consistently,” he said. “Lending was done based on it, and everybody did a lot of foolish things.”(N.Y. Times quoting Warren Buffett on Charlie Rose from an interview last week)
That pretty much sums it up. Despite credit expert Jim Grant (and interviewer Steve Kroft, and bumbler Andy Rooney) blaming Wall Street for all problems on 60 Minutes this past Sunday, one can actually put the blame everywhere, and find an irrationally rational, and non-criminal, basis for much behavior in the mortgage boom.
To assume that housing prices will continue to rise is natural in that it conforms to human hopes and expectations. Everyone from the stupid to the smart accepted that theory like it was immutable, and thus, most actions following that one irrational assumption were quite plausible.
The Washington Post has a nice little piece that kind of demonstrates the point (in Ireland!):
"I have never seen property values in my life go down, and they just took a nosedive," said Finn, a father of four. He said if the economy had not turned sour, he would be sitting on multimillion-dollar profits from luxury property sales. Instead, he said, he has millions in debt.
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