Comment by ktRolster

In retrospect (as the housing prices have mostly recovered: http://www.doctorhousingbubble.com/wp-content/uploads/2013/0... ), the hosing crisis can be seen as an irrational bubble, with the major problem being that the banks were under-capitalized for the risk they were taking on. After several years of injecting capital into the banks for several years, they are fine. Arguably the banks didn't worry about the risk because they trusted the government would help them out.