Causes of the Foreclosure Crisis: Why Did So Many People Make So Many Ex Post Bad Decisions?

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By Christopher L. Foote (au); Kristopher S. Gerardi (au); Paul S. Willen (au)
Year: 2012
Pages: 62
Binding Paperback
ISBN 978-1-4578-3307-6

Product Code: 1457833077

Description

Presents 12 facts about the mortgage crisis. The authors argue that the facts refute the popular story that the crisis resulted from finance industry insiders deceiving uninformed mortgage borrowers and investors. Instead, they argue that borrowers and investors made decisions that were rational and logical given their ex post overly optimistic beliefs about house prices. Neither institutional features of the mortgage market nor financial innovations are any more likely to explain those distorted beliefs than they are to explain the Dutch tulip bubble 400 years ago. Economists should acknowledge the limits of their understanding of asset price bubbles and design policies accordingly. Charts and tables. This is a print on demand report.

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