Privatized Gains and Socialized Losses

Abstract

Before the subprime crisis, mortgage markets had been operating efficiently for generations. Originally facilitated by local banks, mortgage societies, and savings and loans, these markets matched long-term and nicely collateralized borrowers with lenders that were equally interested in long-term lending. Risk was low because the approximately 60% of households who purchased homes strived toward and prized this American dream. Times have changed.