Doug Henwood wrote:
>
> On Dec 15, 2007, at 2:18 PM, bhandari at berkeley.edu wrote:
>
> > 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?
>
> Because it looked like a good way to make money. Why else?
I don't think this tautology is responsive to Rakesh's question. It could be reworded, "Why did this look like a _better_ way of making money than _other_ available options (ASSUMING such options were available)?" And if other options were _not_ available, why was that? Your answer assumes the money men did nto canvass opportunities but merely responded to an isolated stimulus as though the rest of the world did not exist.
Carrol