The article even goes so far as to say banks were making No Income and No asset loans with no or little truthful documentation.
If that's so, then where are the prosecutions for documentation fraud?
The fact remains that mortgages take it on the chin in every economic downturn, and this is the worst downturn since the great depression. It wasn't caused by mortgages. It was caused by the oil price shocks.
And if that's so, then which is it. The banks were forced to make these loans. Or the banks committed documentation fraud so that they could make these loans? I'm not buying that the banks were forced to commit fraud. If the really couldn't find worthy buyers in a community, the worst case is that they were forced to stop taking that community's deposits.
The Village Voice wrote comprehensively here describing the Clinton-era dealings.
The first incentive I remember was if you bought a house - and lived in it for 2 years - you didn't have to pay capital gains on the profit.
Each year it seemed there were more incentives - for banks, lenders, citizens etc. People were using their homes like ATM machines. Who could blame them - a house bought for $80,000 in some neighborhoods were selling for $400,000 a few years later.
Of course there wasn't really money in the house - that was an illusion until the house was sold. But people bought the idea - banks agreed and the housing market kept heating up on endless good news.
The problem: the system worked like a ponzi scheme. The first people in got out with money - lots of it. The last people lost everything. Most of us in Florida could see what was happening - anything could have caused it to burst - the situation was that unstable. So no, it wasn't oil prices .. it was government incentives that caused the mess... oil prices might have helped bring it down - but at the level it was operating, higher coffee prices could have brought it down too.