Bubble Nostalgia

This insider tries to make sense why the Bubble popped. It was, after all, a Mighty Fine Bubble. He sees less fraud, and more delusion:

In my last months at Citigroup I would field several calls a week from CitiMortgage’s servicing people who were trying to work out payment plans for delinquent homebuyers. What they—the servicer, the homebuyer, and if they had been consulted, most MBS investors—would have liked was to reduce the principal and interest on the mortgage to a reasonable level, one that would keep the homeowner in the house making at least some payments. But any reduction in principal or interest was barred by the securitization documents, which could only be amended by a vote of two-thirds to 100% of the bondholders, a procedure that was never attempted. The best we were ever able to do was to defer payments, which didn’t help much, and we weren’t always able to do that; it depended on how the documents, which had evolved over the years, read for the particular securitization.