Back to my pet idea, the link between housing crisis and immigration. Yesterday's Post had this article:
"The number of immigrants coming to the United States slowed substantially in 2007, with the nation's foreign-born population growing by only 511,000, compared with about a million a year since 2000, according to Census figures released today. "
Say the housing industry was building 400,000 housing units for immigrants since 2000, and selling them, either to immigrants or to landlords who rented them out. All of a sudden, the demand is halved. I believe the housing market is probably inelastic--takes a big change in price to get someone to downsize or upsize. So the change in immigration probably took the pop out of the housing bubble. Once the bubble burst, the Ponzi-style nature of the securitization of debt that the smart boys on Wall Street had engineered made the consequences much worse than they should have been (as they were when the housing bubble burst back in the 80's.)