Subprime lending fueled a real estate bubble that later collapsed. It had to do so eventually, as prices outstripped what buyers could afford to pay.
Bubble-inflating lending was fueled by loan originators packaging and selling their loans to other people, offloading their risk to other people. The ability of originators to offload all of their risk removed any incentive to accurately assess borrower creditworthiness and loan viability.
Shouldn't we try to revise the system to insist that loan originators of most sorts must retain some substantial portion of the risk they create by originating the loan?
Or at least ensure that such risk is not obscured in a haze of complexity? I am not arguing that we repeal caveat emptor. But if you look at the chain of custody of this risk-selling, you see that ratings agencies gave high investment-safety marks to a swath of investment vehicles which not only collapsed, but were loaded with packages of high risk loans. If entities which set themselves up as experts are this dumb and or compromised, what hope is their for the rest of us.
I think we either need to make the risk-makers keep some of their risk, or reform the system so that bullshine salesmen are penalized when their bullshine proves to be just that.