Go read what happened. It’s kind of long, but good and explains it pretty well. The Big Takeover : Rolling Stone
People are pissed off about this financial crisis, and about this bailout, but they’re not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d’etat. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.
The crisis was the coup de grace: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess.
basically, after deregulation, the big investment banks couldn’t find “enough unemployed meth dealers willing to buy million-dollar homes for no money down” tokeep the mortgage racket going.
And yes, what it comes down to is that all this means that housing prices still have a loooongggg way to fall. Every single house that sold for more than it should have, for all those years, to all those suckers, who took out all those mortgages — they all have to go back where they should be. Bubbles unwind ALL the way down, every time, and you can’t “reignite the housing market” or “stabilize” prices or anything else.
Go look at the trend line of house prices for the last hundred years, and that is where prices have to be — where housing is relatively cheap, never more than 25-28% of your income (and that is the UPPER limit), and a mortgage plus taxes plus insurance plus maintenance is lower than rents by enough of a margin so that people can make money buying a house and then renting it out.