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The Housing Bust and Lending: The Worst Is Yet to Come   (May 14, 2008) "It's worth recalling how few people buy houses for cash. The entire edifice of home ownership rests on debt--buyers being able to borrow large amounts of money for a reasonable rate of interest." "The entire housing bubble was essentially a debt bubble, driven by lending standards which sank to near-zero (anyone with a pulse willing to lie was suddenly qualified to borrow hundreds of thousands of dollars), non-U.S. buyers snapping up trillions in mortgage-backed securities (MBS) and derivatives, and lax lending regulations enabling banks to lower their reserves to 1% and spin the mortgages off their balance sheets."   "As the reinforcing fires of falling values, tighter standards and fear spreads, the risk of lenders failing is rising fast. If we think through the consequences of the debt bust--fewer fools (oops I mean investors) willing to buy depreciating...
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