> They should have just taken their licks back then
The theory posited at the time is that this would have triggered collateralised debt obligations which would have resulted in a cascading spiral of CDO triggers which would have revealed that each dollar of commercial real estate had been used to generate 5000 dollars of 'securitized' debt, or some other ludicrous figure.
There's a pretty famous infographic somewhere which shows the ridiculous scale of the CDO problem.
I've never understood why building house of cards financial instruments that can fall apart at a moments notice is still legal. How many times do we need to go through 2008 style crashes before we can stop it?
> I've never understood why building house of cards financial instruments that can fall apart at a moments notice is still legal.
It was illegal. It was illegal for over half a century. From the get depression onwards when it previously caused huge problems. And then a group of people started chanting about 'deregulation' and how much money they could make and yet again people feel for it and ignored all the lessons learned lay time people for greedy and started asking for lax oversight and rules for their financial markets. And we'll keep having examples of lessons to re-learn until we put the same regulations back that prevented this.
CRE has been in trouble since before 2007, and all it has managed to do is be zombies. They should have just taken their licks back then and maybe things wouldn't be as bad now.
The theory posited at the time is that this would have triggered collateralised debt obligations which would have resulted in a cascading spiral of CDO triggers which would have revealed that each dollar of commercial real estate had been used to generate 5000 dollars of 'securitized' debt, or some other ludicrous figure.
There's a pretty famous infographic somewhere which shows the ridiculous scale of the CDO problem.