The housing bubble and ensuing financial crisis not only wreaked havoc on the U.S. economy, but it also shook public confidence in financial markets and robbed Americans of their faith in homeownership as a stable iconic pillar of middle class security.
Much of the fallout can be blamed on the exotic financial “innovations” hawked by Wall Street in the run-up to the financial bust: “liar loans,” where no verification of income was required; synthetic derivatives, whose highly speculative design put the entire financial system at risk; and home equity lines of credit that exceeded the value of homes by up to 125 percent.
Today, housing prices are finally rising and the stock market is going gangbusters. But the idea of “financial innovation” retains its negative aura. That’s a problem, because just as there are good and bad witches in Oz, there’s good and bad innovation on Wall Street.
Read the entire piece at U.S. News & World Report.
