by flory

Although I agree with Barry's conclusion here -- it was a lack of regulation that led directly to Big shitpile -- I find his premise somewhat curious:

The immediate gains in compensation for all parties involved seemed to totally overwhelm the longer-term concerns of ensuring loans get repaid.

His contention is that there was something irrational in how we got into Big Shitpile. If all the actors involved were behaving rationally, they would have taken a longer term perspective and not allowed the excesses in the market to pile up.

I don't see it. To my mind, the individual actors -- brokers, bankers, appraisers -- the human beings involved -- were acting completely rationally and that's the root of the problem.

These people all made a shitload of money over the last decade. And they're all going to get to keep it. Mortgage banks may be failing and mortgage backed bonds may be defaulting, but nobody is asking the mortgage bankers to pay anybody back.

There is absolutely no penalty for the people who created Big Shitpile. The long term perspective -- and the negative consequences we're seeing now -- affect the institutions, not the people. The banks are out of business; the bankers are still sitting on their cash.

And as long as there are no penalies -- serious financial penalties -- involved in being a human agent of a Big Shitpile, there will continue to be Big Shitpiles -- again and again and again..