[ExI] Was it just greed?/was Re: Psychology of markets explanations

[Dan]

--- On Sun, 5/31/09, Damien Broderick <thespike at satx.rr.com> wrote:
> At 03:20 AM 6/1/2009 +0200, Mirco wrote:
>> My psychological state don't make me able to buy a
>> home if I have not the money to do so.
> 
> Hahahahaha! I see you haven't been reading the papers in
> the last few years.
> 
> (Granted, being able to buy a home without money requires
> an appropriate pathologically greedy psychological state in
> other people and their institutions as well. Welcome to the
> real world.)

Since people have been greedy, even pathologically so, from time immemorial (and probably will continue to be so even in any posthuman future), the greed explanation can't explain much.  Why did the boom happen then and the bust now?  Greed can't explain that -- unless you posit a cycle of greediness.

That said, yes, there are lenders out there -- or were, as a lot of that's drying up now -- who will lend with no money down.  One has to ask, though, why they appeared on the scene.  What makes them possible in the first place -- as people generally don't want to make loans to people who can't repay them?  The explanation seems to lay in the direction of the historically low interest rates, the subsidies to home ownership (under the CRA and with the federally backed and now owned Freddie Mac and Fannie Mae), and how these interacted.

Regards,

Dan