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loan and defaults. Your local bank takes the hit. It stops there. If the bank is irresponsible in lending, they take a lot of hits and go under. FDIC steps in, bank depositors are fine. It stops there. No financial meltdown. If mortgages directly caused the subprime crisis, it would have stopped at the bank. But people are an easy scapegoat. This is why your idea is wrong. First, it's the bank's responsibility to determine who is worthy of a loan, that's basic finance, no way to argue that. That was the first problem. Then they passed on that risk to a deceptive financial product and were motivated to lower their standards to loan to anyone, creating a bubble. Mortgage backed securities and insurance are financial products, not mortgages. AIG was sunk by credit default swaps not mortgages. Lehman was sunk by securitized mortgages and leverage, not mortgages. That's like saying the American Revolution was caused by the stamp tax. An easy scapegoat.
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