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House flippers triggered the U.S. housing market crash, not poor subprime borrowers

Posted by   /  August 31, 2017  /  1 Comment

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Mortgage ratesBy Gwynn Guilford | Quartz

The grim tale of America’s “subprime mortgage crisis” delivers one of those stinging moral slaps that Americans seem to favor in their histories. Poor people were reckless and stupid, banks got greedy. Layer in some Wall Street dark arts, and there you have it: a global financial crisis.

Dark arts notwithstanding, that’s not what really happened, though.

Mounting evidence suggests that the notion that the 2007 crash happened because people with shoddy credit borrowed to buy houses they couldn’t afford is just plain wrong. The latest comes in a new NBER working paper arguing that it was wealthy or middle-class house-flipping speculators who blew up the bubble to cataclysmic proportions, and then wrecked local housing markets when they defaulted en masse.

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1 Comment

  1. Pat Pierce says:

    What a beautiful piece – rewrite history indeed.

    No one has ever claimed it was poor people who caused the subprime crisis. It was the government who said everyone deserved a house whether they could afford it or not and changed the mortgage qualifications rules so that anyone could get a mortgage with no documentation. Unfortunately turns out you do really need to be able to make your mortgage payment – once the bubble built on sand began to crumble there was no stopping it. This isn’t about poor people or rich people – it’s about HUD demanding that banks see everyone gets a house and Janet Reno threatening to shut banks down if they didn’t make it happen.

    Folks this is how a lie becomes the current “truth”. Say it enough times and people who don’t think begin to believe it.

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