Why Did So Many People Make So Many Ex Post Bad Decisions? The Causes of the Foreclosure Crisis
Christopher Foote (),
Kristopher Gerardi () and
No 18082, NBER Working Papers from National Bureau of Economic Research, Inc
We present 12 facts about the mortgage crisis. We argue that the facts refute the popular story that the crisis resulted from finance industry insiders deceiving uninformed mortgage borrowers and investors. Instead, we argue that borrowers and investors made decisions that were rational and logical given their ex post overly optimistic beliefs about house prices. We then show that neither institutional features of the mortgage market nor financial innovations are any more likely to explain those distorted beliefs than they are to explain the Dutch tulip bubble 400 years ago. Economists should acknowledge the limits of our understanding of asset price bubbles and design policies accordingly.
JEL-codes: D14 D18 D53 D82 G01 G02 G38 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (49) Track citations by RSS feed
Downloads: (external link)
Working Paper: Why did so many people make so many ex post bad decisions? the causes of the foreclosure crisis (2012)
Working Paper: Why did so many people make so many ex post bad decisions?: the causes of the foreclosure crisis (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:18082
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().