[lbo-talk] Krugman

[bhandari at berkeley.edu]

> Second, there was a tremendous amount of borrowing into the bubble,
> as new home buyers purchased houses with little or no money down, and
> as people who already owned houses refinanced their mortgages as a
> way of converting rising home prices into cash.

Krugman means that there was a tremendous amount of lending that created
the bubble, as new home buyers were allowed to purchase homes with little
or no money down, and as lenders allowed people who already owned home to
refinance mortgages on the basis of fictitious home price gains.

Why the speculative lending?

Don't think Krugman even suggested an answer.

Rakesh