A recurring policy pattern in U.S. mortgage history is 'extend‑and‑pretend': regulators and institutions repeatedly use accounting forbearance, broadened charter powers, or market engineering to postpone recognition of mortgage losses, which amplifies moral hazard and seeds a later, larger correction. The S&L crisis of the 1980s—Regulation Q, assumable low‑rate loans, securitization, and eventual asset‑quality concealment—is a canonical case that repeats in different forms across decades.
— Recognizing 'extend‑and‑pretend' as a systemic public‑policy failure reframes housing debates toward durable institutional constraints (limits on asset scope, stricter provisioning, transparent resolution regimes) rather than episodic bailouts.
2026.01.05
90% relevant
The Wikipedia entry documents the structure and risks of no‑doc and low‑doc loans (higher default rates, private money with punitive rates, and large pre‑2008 share), which are precisely the kinds of lending practices that feed 'extend‑and‑pretend' dynamics and conceal credit deterioration until a systemic crisis; it supplies the concrete actors and figures (one‑third of mortgages pre‑2008; RBA 5% of bank assets; 4× default risk) that connect the product to that broader idea.
2026.01.05
95% relevant
The Federal Reserve History essay recounts the expansion of risky mortgage credit funded by private‑label mortgage‑backed securities, the subsequent downgrades and funding collapse, and the role of delayed recognition of losses — the historical dynamics the 'extend‑and‑pretend' idea diagnoses as a recurring policy/institutional failure in U.S. mortgage history.
Arnold Kling
2025.11.29
100% relevant
Arnold Kling documents the shift from balloon mortgages to 30‑year amortizing loans, the role of FHA/FNMA and S&Ls, Regulation Q, and how accounting/charter changes in the 1980s enabled insolvent institutions to run on for years—an extend‑and‑pretend sequence.
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