Mortgage interest tax deductions were certainly an accelerant, as they were designed to be, but that alone wasn't to blame. Packaging mortgages into investment

Mortgage interest tax deductions were certainly an accelerant, as they were designed to be, but that alone wasn't to blame. Packaging mortgages into investment vehicles was a horrifically bad affair which was at least the number two ingredient. How do you manage to take 10,000 mortgagees that on average represent 7% 30 year loans and end up with a packaged investment that rates at 20% return? This involved some loose and unregulated mark-to-market math and relied on home turnover in a superheated market. Once leveraged instrument after instrument has been added into this unregulated space, you end up with an enormous unmeasurable structure of debt that has little to do with houses. So it may well be true that mortgage tax deductions were a necessary ingredient, this alone did not cause the debt explosion.