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From Financial Crisis to Recovery (Collection) by Mark Zandi

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5. Global Money Men Want a Piece

The Greenspan-led Federal Reserve wasn’t the only source of easy money powering the housing boom and inflating the bubble. A flood of capital also poured in from around the world. Global investors thought U.S. housing was a great investment. Their funds drove mortgage rates lower and empowered lenders to offer increasingly aggressive—and, ultimately, unmanageable—mortgage loans.

International investors were flush with dollars that the swollen U.S. trade deficit generated. Hundreds of billions of dollars flowed overseas each year in exchange for the imported goods Americans craved.

U.S. consumers had been on a buying binge, fueled by the Federal Reserve’s rate cuts, the massive Bush tax cuts, and all the credit ...

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