I agree - especially this part of Dodson's comment:

"When sub-prime borrowers began to default in droves and the value of the private label MBS tumbled, investors also pulled away from the conventional MBS market as well, even though these borrowers continued to make their payments. However, with a short period the domino effect of defaulting mortgagors spread and then began the recession."

I've always viewed the housing crash as the result of the bottom falling out of the housing market. I don't know how common it is now, but in the early 2000s, it was very common for people to view homeownership as some sort of magic escalator to riches - one would buy a home, then basically be guaranteed to resell it for significantly more later, and the gains would be used to buy a more expensive home.

I went to a free "how to buy your first home" presentation around 2002, and this was exactly the model recommended by the people giving the presentation - people who worked in the home loan and real-estate field. Basically "buy the most expensive house you can possibly afford now, because you'll be making more money in a few years and what you think is an expensive monthly payment now will seem like nothing. Then you can resell your home and buy something even fancier."

Obviously, this depends upon a constant influx at the bottom of the "escalator", which is unsustainable because it's a pyramid scheme. The collapse of that pyramid is exactly what happened, IMO, and it wouldn't have been possible without the sub-prime lending.

A lot of speculators were indeed left 'holding the bag', as it were, when the credit game collapsed and there were no more greater fools to sell to. But the reason there were no more such fools is that the lenders had scraped the bottom of the barrel, and there was no one left to lend to. There's no question that credit standards were loosened across the board, and it was possible for almost anyone to get a loan. For a while, foreclosure rates were low as long as it was possible to refi or sell your way out of a problem. Another thing that happened was a lot of people borrowed against rising equity and spent the money as if it were free cash, and found out the hard way later that it wasn't. And that's before we even get into the effects of fraud--underwriting fraud, appraisal fraud, fraudulent bond ratings, forged paper trails, and on and on. The bubble floated on an ocean of fraud. It was an unrestrained orgy of greed and criminality on every level.

An interesting note from his comment:

"By 2006 many property markets across the U.S. were destined for a serious correction. Property prices had become unsustainable in an environment of stagnant household incomes, employment insecurity, diminished household savings and a heavy reliance on credit card debt to meet everyday expenses. Interest rates would have had to fall to near zero to keep the bubble from bursting."

Lo and behold, our interest rates are basically zero... Sounds like the bubble hasn't quite burst yet.

what makes the whole article junk?