Quote Originally Posted by Dayuhan View Post
You have to add in the perception that if you pool enough dubious loans together they somehow cease to be dubious. Add that to a huge supply of free money (interest rate below inflation rate = free money), and the incentive to take risks on loans becomes overwhelming. If you set up a situation where people can borrow at 1.5% and lend at 7% with zero perceived risk, no amount of regulation or oversight is going to keep speculators from riding that out of control.
Yep. I'll go with all of that as contributing factors. Fannie and Freddie were mixed up in all of this and they were widely believed to be no risk because no matter how bad they screwed up, the gov would step in.