Economist John Lott posted this must-read six months ago regarding the financial mess currently grabbing all the headlines. The article provides insight that you won’t find on the six o’clock news regarding the real reasons behind the crisis.
Forget what you hear from politicians and the media (advice to follow pretty much regarding any issue), this situation arose because of government threats and coercion over mortgage lenders to relax underwriting standards in order to increase homeownership in previously "underserved" communities. (Not to mention the loose monetary policy after the 2001 recession which inevitably leads to asset bubbles)
Here is a slice of the article in which Lott poses a question to critics that I haven’t found an answer to yet:
"But if lending money to people with so little credit worthiness were so obviously such a boneheaded mistake that even non-bankers see it, why would people who had billions of dollars at stake and years of experience lend out money this way?
To critics the answer seems simple: Greed.
Yet, no matter how greedy you are, would you think that loaning money to people who are likely to default with little collateral in their property was the way to riches? Would you lend your money out that way?"