The bubble would not occur if lending standards were tighter when the feds lower rates.
How is it that financial insitutions, whether huge or small didn’t see the magnitude of the subprime fallout.
What this mess feels like is a grand experiment by Greenspan —and all of the others who are financially untouchable and manipulate big economic decisions via hype. This is like the build up of believing in tech because the sky was falling as we “reset” for the year 2000 and some ethereal disaster was impending. 2000 came and went —and with it all the doom hype.
If rates were to go below 5% and conservative lending practices were the standard, ie, documentation 20% down, fixed rate…then no bubble could happen. Flippers could not assume the amount of “risk,” already being over-financed elsewhere….and most people could afford some kind of starter home —-in some neighborhood, not paying $400K for a 40 year old ranch worth no more than $130K, if that.
