The “artificial” forces (especially those brought on in 2003) magnified the “normal” market forces. This is why the FED is culpable. Perhaps they are correct that the housing bubble could not have been completely prevented but they did not have to throw gas on the flames.
The extreme government involvement in housing looks like a grand experiment that went horribly wrong. It is clear at this point that we all would have been better off if this “experiment” never took place. However, at this point it is not clear to me how the ties can be severed without destroying the entire economy.
It is ironic that the one thing the government could have done to prevent this bubble from spiraling out of control (regulating the mortgage market) was the one thing they decided to keep their hands out of.
