Comment on Angry Bear

It was easily predictable that at the end of the housing bubble, we’d see a lot of homes getting foreclosed. But there is nothing inherent in the end of a bubble that requires vast numbers of foreclosures. The reason we see them is that lenders made imprudent loans, and of course, that many people took those imprudent loans.

I have to slightly disagree with what you are saying. I see little relation between the current U.S. housing situation and the South American debt crisis. The idea that risky loans were given to South American countries is reasonable. The bankers that issued the loans would be immune to any repercussion long before the loan defaulted, because the terms on these types of loans span decades. The housing market in the U.S. will likely not see many foreclosures because the terms on home loans are much shorter. If a home loan defaults, it is likely that the issuing banker will still be employed at the bank when this occurs. This potential risk would cause bankers to be prudent in their lending practices. Hopefully most of the loans made during the housing boom were sound. If this is true there should be few foreclosures. The problem with the South American loans is that they were not used for their intended purpose. Based on the recent housing boom in the U.S. one could conclude that most of the home loans issued were actually used to purchase homes. These borrowers used the money to produce something of value that can be taken away if they default. This is not the case with the South American countries.