1. Prior to the housing bubble prices for housing went up 1% percent a year and thus were considered a safe and steady investment. During the housing bubble the price of housing would go up anywhere between 3 to 6%. What lead to this change is the fact that after the Glass steagal act was repealed the housing market now became more interconnected with securities, and a market which is prone to high amounts of speculation. When investors saw the housing market beginning to boom they immediately started widen their portfolio, and over speculate on housing. Thus as a result the housing industry no longer became a steady safe investment, but instead something more prone to violitale changes like most things in the stock market are usually prone to doing. Thus if the Glass-Steagal act was never repealed we would not have had housing so interconnected with the stock market, and a stocks almost inherit inclination to behave in a highly violalate manner.
Nonsense! There have always been housing booms and busts. The "safe and secure investment" line was BS while prices were on the way up and is still BS now.
Now what was different in the past was that banks generally held the mortgages they issued, and thus they screened their customers better and insisted on sufficient down payments. Federal policy (and Fannie/Freddie) simultaneously attacked both pillars, and the market hopped on the bandwagon looking for better returns after the tech bubble collapse.
