One thing about the sub-prime problems, there was certainly , right at the start, a desire to make home ownership available to people who were never going to cut it.
Boomerations,
The only sentiment that markets have and that can range from euphoria to pessimism and everything between is a metric of their anticipated ability to deliver profits.
What happened was that when they separated the lender from the investor through a process called secularization the focus of the lender moved from quality to quantity as he was passing the risk of default to somebody else. That is, the name of the game for the lender became 'more the better'.
The model, I believe, was something like this: with a bit of capital and borrowed money from commercial banks, other institutions and the public and the help of mortgage brokers lend vast sums for housing. Now pack the mortgage loans so obtained into different packages, call in the rating agencies to bless them and then flog them into funds created by yourself. Once this has been done invite investors to purchase units in those funds and with that money restart the hole process again.
The problem was that when the music stopped a lot of sh... that was floating around could not be passed.
"Securitization is the process of taking an illiquid asset or group of assets and, through financial engineering, transforming it (or them) into a security. The derisive phrase "securitization food chain," popularized by the film "Inside Job" about the 2007-2008 financial crisis, describes the process by which groups of such illiquid assets (usually debts) are packaged, bought, securitized and sold to investors."
