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Should we hold the low-income households who took out mortgages, they could not afford responsible for...

Should we hold the low-income households who took out mortgages, they could not afford responsible for the financial crisis that ensued?

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The financial crisis that busted out in the year 2008 occured primarily due to the excess and unverified lending of commercial banks with an aim to make more and more profits with excessive lending to every household. The income consideration for lending out was set apart and priority was being given to higher profits and return to shareholders instead. The banks resorted to such aggressive lending with an expectation that they will be able to sell out the mortgages in MBS packages back to the people and therefore eventually the public will own its own debt and no one in between. This lead to excessive lending and created bubble in real estate pricing which also increased the interest or EMI payment for the low income households. Therefore low income households directly were not responsible for financial crisis. The crisis occur because of bubble in real estate pricing, and the cause of such bubble was unnecessary lending from the side of commercial banks to the people.

jeff jeffy answered 8 months ago
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