There has been more than ample debate about where the blame for the housing crisis lies. (”Lies” being the operative word, perhaps?) Well, according to a recent WSJ MarketWatch article, the Boston Fed, after much careful analysis, has concluded that the housing bubble and ensuing bust were not the result of the financial industry having deceived mortgage borrowers and investors (though, I must point out, there can be little doubt that such deceptions did occur). Rather, the primary factor responsible for the formation of the housing bubble was that home buyers and mortgage investors held overly optimistic beliefs and expectations about future home value trends.

In other words, the Boston Fed is making the case that above all else, the housing crisis was brought on by basic human psychology (itself being susceptible to the wiles of Greed & Folly, of course) and the madness of crowds. If history is any guide, it seems that the occasional asset bubble is an unavoidable, inherent quirk of free market behavior. After all, if it can happen to tulips, it can happen to houses, too.