Saturday, April 26, 2008

Mortgage Follow-up -- Liar's Loans

A nice article on the breakdown in honesty norms that added fuel to the mortgage crisis:

Here's the narrative we've heard about the mortgage meltdown: miscalculation and unfounded optimism, clueless investors, cash-strapped home buyers clobbered by rate resets.

But there's one piece of the mortgage-meltdown tale that virtually every article or television program dances around without ever quite confronting. It's the simplest aspect of the crisis to understand and also the most troubling, because it's not about complicated financial dealings and can't be fixed with bailouts. It's about an astounding breakdown of social norms.

The most surprising part about this to me is that people seem to have thought they could overstate their income without being so pressed for money in the future.
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