by Nicholas Beaudrot of Electoral Math
Having followed the housing bubble only tangentially, my impression is that the problem with the looming foreclosure fiasco has little to with a large number of idiosyncratic income shocks leading to rising nonpayments. Nor does it have to do with a macroeconomic downturn. Rather, it has to do with the fact the booming "nontraditional mortgage products" such as ARM loans were unbelievably stupid loans from the perspective of both the buyer and the bank. This has echoes of the 2001-2002 accounting scandals, or Eliot Spitzer's investigation into Merrill Lynch's bad-stock-pushing practices; if we had evidence that Countrywide et al. knew they would push their customers into foreclosure under all reasonably forseeable circumstances, Eliot Spitzer would have a case. Maybe there's a fine distinction that makes the housing boom different, but I'm initially skeptical.
Exactly how to assign fault or distribute economic hardship in this sort of situation, where businesses have pushed customers to make unsound decisions, is unclear.
