New Study Shows Why It Makes Absolutely No Sense to Blame the Poor for the Financial Crisis

Despite efforts to blame the housing crisis on lower-income buyers, the truth is that the rich had a greater impact on the economy by defaulting on significantly larger mortgages.

The Washington Post:

Irresponsible lending might have been one of the many causes of the financial crisis — but not just irresponsible lending to poor people, according to a new study.

“The large majority of mortgage dollars originated between 2002 and 2006 are obtained by middle- and high-income borrowers (not the poor),” the authors write. “In addition, borrowers in the middle and top of the distribution are the ones that contributed most significantly to the increase in mortgages in default after 2007.” Rich people tend to take out larger mortgages, of course, but the fact is that the amount of money poor borrowers failed to pay back was just never that significant, as this chart from the paper shows. In case you have a hard time believing that so many larger mortgages could have gone into default, The Washington Post just published a series of stories on subprime, sometimes predatory lending in relatively affluent places such as Prince George’s County, Md., outside Washington, D.C.

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—Posted by Natasha Hakimi Zapata