The 2008 housing crisis is almost always attributed to the practice of subprime lending. According to this article, there were other reasons for the crisis.
1) the change in lending practices and standards for private sector lending. As an example, the lenders used to use the three Cs: Credit, Capacity, and Collateral. Instead of using the three Cs, the private lenders innovated and just used FICO scores, and then eventually little or nothing to underwrite the loan. There were other innovative changes in lending practices that didn't work out very well.2) The rating agencies models were based on prior lending methods, and weren't adjusted sufficiently to account for the new (non-existent) underwriting standards. This meant the private label MBS was rated to highly.
3) The regulators turned a blind eye to the loose lending and excessive concentrations. I was talking with field regulators in 2005 and 2006, and they were all terrified. I was told the appointees at the top of the agencies were blocking any effort to tighten standards.
I have only ever been told that subprime lending was why the housing bubble burst. These 3 reasons seem to be in line with my prior understanding of the problem, so I don't see why these are any different from the general understanding. What do you guys think of this article's reasoning? Does it make any sense?
