[Elspode]

This whole mess was created by a deliberate chain of events. First, the Feds take away tax credit for consumer loans, leaving only mortgage interest as deductible. The lending market, knowing a good thing when they see, begins offering equity loans in order to put people's home equity into the pockets of others.

The value of the average house subsequently appreciates way out of proportion in order that people have more equity to borrow (gotta keep feeding the credit machines). Housing prices escalate beyond all reason, so in order to continue to feed the credit monster, subprime loans are created and doled out liberally to people who can't afford them. The balloons hit, and at the same time, the resale/newhousing markets go tits up, and voila! Crisis.