Well, the lenders were part of the chorus. There were certainly an abundance of "Free up your equity!" ads on the radio. But the spiraling hysteria was a social, not a banking, phenomenon. On television, programs like "This Old House" which taught people how to renovate their own homes, gave way to "Flip This House" which encouraged people to buy up homes, slap a coat of paint on them, and make boatloads of easy money, all in one weekend. The main banking-related problem in the panic that followed the bursting of the bubble was that banks which behaved recklessly weren't allowed to fold. "Too big to fail" suddenly became not a promise to stockholders, but an obligation foisted on the public.

That said, I'd like to extend my congratulations to the author for not employing the silly and vapid term "Great Recession" (the economic equivalent of "jumbo shrimp") to describe the recent panic.

Let me be the first old timer to reminisce on the house I grew up in: about 900 sq. ft (maybe less), two brothers, two sisters, two parents and sometimes a hired man. I don't remember feeling crowded but we probably spent more time outdoors than people do now.

Hey, that's great advice, delivered in that earnest tone that well-meaning liberals always have. The only problem is that you're addressing the wrong crowd. People didn't suddenly start demanding 2000 square foot houses. The builders, with the usual media hype assistance, started promoting them. Why? For the same reason that the automobile industry promoted big trucks and SUVs, despite there being no earthly reason they were necessary. It's a very simple economic concept: Profit per unit cost. Big houses, especially those shoddy McMansions that will start falling apart any time now, make more money per unit than small houses. Ask yourself: does a builder have to pay higher cost for empty space? No, and hell no. Ask any residential builder, and they will tell you they make much more profit on a large house than a small one, simply because the cost/price factor changes in the builder's favor as the house increases in size. It is analogous to auto makers realizing a bigger rate of profit on trucks and SUVs than on small cars.

So, great idea, small houses, no figure out how to make the normal market mechanism favor them, and they will get built. Or overide the market and impose rules or fees on builders to force them to cooperate.

kieth - But I'll bet you didn't own one pair of shoes for walking, one for running, one for hiking, one for basketball, one for tennis, and so on. People now need room for all their stuff.

When the McMansions started coming on the market, I would look at them and wonder who's going to clean all those toilets and paint the cathedral ceilings and change the lightbulbs?

"Salvage, slums and ruins" - the fate awaiting the McMansions according to James Kunstler. But, precious little other than perhaps a little copper to salvage from the stapled together particle board, and not much scope for subdividing into apartments like there was for sturdily built older mansions. They won't even make for interesting ruins, just some gypsum dust with some plastic junk scattered through it.

Nobody forced anyone to purchase those ridiculous ugly things and I have no desire to bail out anyone who bought or financed them. We used to have something called capitalism in this country, and "creative destruction" and failure were a part of it. What a shame that so many irreplaceable resources went into constructing the trappings of a way of life that will be of utterly no use to anyone in decades ahead.

Please stop using "smarter" in Crosscut articles when referring to the choices that liberals want us to make

I do not want to live in a 900 square foot house and I just extended my house so that it has more than 450 square feet per resident and I do not feel guilty. It is how I chose to spend my hard earned money and it is probably more environmentally sound than many other options for spending it.

A good and down-to-earth analysis, independant of any "liberal" slant too. Although I don't believe a 900 sq ft house is comfortable for more than two people, we definately need to move away from the status quo if we expect to maintain any semblance of a quality of life.

So, David Smith, would you feel better if those choices were called "sustainable" instead? Somehow I think you would think that condesending too. Don't worry, that space certainly won't be sustainable after you die, not matter your attitude, or how much you have left to pass on. Enjoy it while you can.

I do not find "sustainable" condescending but it is another buzzword used in an attempt to trump other arguments, however sensible.

My house is ~100 years old and with the new extension will last another 100 at least. I am sure they exist but I do not know of any single family homes in my neighborhood that have required substantial renovation within 10-20 years of being built or extended. The same cannot be said for all these "sustainable" condominiums that are springing up on every arterial.

My retired neighbors have a small house and recently invested in a Prius and are very proud of their low carbon footprint but they jet off twice per year for vacations in the far east or Pacific Islands which more than offsets all their carbon savings from living in a small house and driving a fuel efficient car. The bottom line is that if a big house causes one to spend more time at home and travel less, it is probably promoting a sustainable lifestyle.

Nobody who knows what "sustainable" really refers to uses that term for those condos you refer to. I agree it's overused in marketing just like the term "green" or "natural." It is incumbent upon those who buy on the basis of that to check it out to see if it is, or not brag about it being something it is not. It is not used to "trump other aruguments" when it's used correctly. It's not that hard to learn the difference, but easier to make the assumptions you do.

Your house is sustainable. Your neighbors share of carbon emmissions for plane flights twice a year would seem than offset by the Prius if they drive the average 12K miles a year. Since we cannot completely eliminate carbon emmissions at present, reducing them is a step in the right direction, NOT a contradiction.

s-calvert, yes, the advent of the big box store and the giant shopping cart have been indicted as partly to blame for big houses. If you spend $400 at Costco you have to have space to put all your new stuff; it's definitely a contributor to housing flab. Garages store "stuff" and cars park in driveways in my neighborhood. It is a total societal malady.

"It wasn’t the buyers who made those claims about residential real estate — it was the people who were making the loans."

Too simple. It was Fannie Mae, and congress, and two presidents, and the irresistable urge to meddle with markets. It was artificially low interest rates that sent hedge funds seeking higher secure returns. And it was buyers / investors who thought the music would never stop.

It was about greed and the assurance that Uncle Sam and Greenspan had our (their) backs. And sure enough, they did. Now it's about bailouts and keeping market prices high and punishing the prudential and rewarding the profligate.

I too like smaller homes--much easier to maintain, and they're snug, which I like. Still, to each his (or her!) own. Let the market decide.

You are right about smaller homes. I grew up in a small row house. People didn't have yards or family rooms, but people paid taxes and the schools were good. Teachers weren't laid off. Nowadays people have a sense of entitlement about a large house and multiple cars, and then they whine about taxes. Perhaps if people bought an affordable house, they could afford the taxes. In Japan people live in smaller spaces, but they have national health care and college is affordable.

When taxes become so burdensome that they deny people their dreams, democracy is dead.

That's exactly the point. Taxes facilitate, rather than deny, people's dreams. Through taxes people can go to school or see their children go to good schools. When people spend everything on McMansions and don't want to pay taxes, the schools suffer, there isn;t enough money left for college tuition, and the young can't fulfill their dreams.

Building smaller houses is not the answer. As long as Americans insist on living in single family homes with grass all around them, the urban sprawl will continue. This puts incredible pressure on our infrastructure and keeps us dependent on our cars. To have a significant impact on our housing, we need denser alternatives to single family houses. But I doubt that will happen unless gas prices get to $6/gallon. It will likely take a major crisis to get us to change our ways.

My question is: what would have happened if we had bailed out the people underwater instead of the banks? First, how much bailout would there have been? Enough to cover the difference between the prior and new housing prices? Would the fall in housing prices have been averted at some reasonable point? And the big question: what would prevent people, whose credit was then restored, from continuing to overspeculate? Bad decisions should not be rewarded!

However, I thought at the time and still think that would have been the better approach, rather than hand out money to the institutions that fueled the problem. Bastards!

So, do you think it could have worked?

Maybe. It would have had to have been equitable. Simply handing out money to those who foolishly bought starter castles (rewarding idiocy) while those who were responsible enough not to go into debt wildly would never fly. Maybe give the same amount of money to everyone, if you have an underwater house it has to go to paying it off, while if you were smart enough not to have an underwater house, you keep the money?

But then, why not just print up and give everyone a million dollars and we'd all be millionaires? No one would have to work anymore. Seems simple to me. Why hasn't this been done?

Well, it depends on how the program is structured. If the problem was the interest rate increasing on an adjustable rate mortgage, converting the to a 30-year fixed rate would have made things more stable.

So what if a house is worth less than the original house. If the owner is making the payments, the owner still has the house to live in. The situation of being "underwater" really matters the most if someone is trying to flip the house. The minute you walk out of a dealership, a new car is worth less than what you paid for it. But you aren't buying the car like stocks, you are buying the car for transportation.

The goal is to allow pwoplw to stay in whatever home they live in, to avoid the chaos of having masses of people left without a place to live. Having all these empty houses with the lawns overgrown by weeds is not in the interest of the community.

Exactly, "if the owner is making payments, he has the house". That means he doesn't default, which was a major cause of the whole collapse. That is, once a bank is trying to sell a house under market price, all the other house prices need to come down, and so on.

Right, you can't simply dole out money to those buying starter castles. I don't claim to have an answer and, I'll admit, that the bureocracy to do it right might destroy the whole approach.

Is this still relevant? Could be. Depends largly, I think, on what happens in the eurozone. If we have a second downturn (I'll stay away form collapse), I don't want to see the billionaires bailed out again and folks like you and me suffering.

This is one of Crosscut commenters' better discourses. My thanks to the contributors.

The theme of Crosscut articles and majority of commenters continues the trend of the last 25 years where everyone is in each others business, and snidely offering opinions and labels such as McMansions.

No wonder we endure Nannyism from our own State electeds and policy makers. We can't even allow our neighbors to live as they see fit.