Shady lending is part of the problem, certainly, but there’s a flip side component to the foreclosure crisis. Like the Great Depression, easy and cheap credit has helped fuel the fire this time around, and it’s not just the banks at fault.

It’s important to acknowledge the fact that this kind of behavior was common.

We should also keep in mind that it takes two to make a mortgage. If you and I can tell that pulling $400K of equity out of your $400K house is dangerous, the mortgage companies should’ve been able to as well.

And as soon as I raise the question, the next blog post at Atrios’s place linked to this article at the Irvine Housing Blog… glad to see that I’m at least asking intelligent questions. If the linked data is correct, at the peak 10% of disposable income was coming from equity extracted from housing (it’s unclear to me whether this is nationwide or CA specific data, but the scale of the numbers implies nationwide).

That’s a big number.

More about the Fed’s actions on Friday, including an explanation of how unusual the Fed move was on Friday. The short version is not super unusual, but read the article for an Fed insider’s explanation.