Starkers, all your points are well thought out and true.
My point though is that each of us knows what is within our means (our income) and our ability to pay. The folks caught up in all this could have provided for thier family (roof over the heads, food, clothing and such) and not have fallen prey to the conmen.
OK, let's put it another way. What about the family on combined income of $70,000 pa and they take out an affordable $200k mortgage on modest home over 30 years because rents keep going up and it's dead money anyhow, and for the first two years this family is doing well, with repayments as well as a few home improvements, etc. Yup, everything is going well, but suddenly the wife's capitalist employer lays her off to maximise profit through reduced production/labour costs, leaving just the husband working on 35,000 pa. It's a struggle but they're still managing their repayments and keeping their heads above water... then the husband is told he has to take a pay cut if he wants to keep his job, and this happens just about the same time as interest rates start to rise sharply. Uh, oh, look out, they have fallen behind in their mortgage repayments and now the bank is foreclosing... they're going to be homeless with two young children.
Yes, that was a hypothetical situation, but there were thousands upon thousands of situations just like it happening all over the US... and other countries, too. The point is, not everyone was gullible and/or got conned into a larger mortgage than they could afford. Many good intentioned people with decent incomes fell victim to the greed ridden capitalists who kept hiking up interest rates and prices on living essentials... and as their spending power diminished greatly over a relatively short period of time, so did their propensity to make their repayments.
As for the 'gullible' who borrowed bigger than they could manage. OK, so a young couple with a family walk into what they understand is a reputable bank to borrow $100k to add to their $90k to buy a home. Sounds reasonable, doesn't it? However, unbeknown to them, the 3 piece suited loans manager is as great a thief, liar and cheat as a balaclava wearing burglar who steals from poor peoples homes. Still, they do not know this and trust him to do the right thing by them... after all, it is a reputable bank - and who can you trust if you can't trust a bank - and it has always looked after their $90k savings, so why not trust the bank....
The loans manager introduces himself and rolls off a list of BA's in economics, math and social planning, etc, before explaining that, with their savings and combines income they can afford a $150k loan, which would buy them a bigger/better house and thus save them a bundle on extensions, etc, when they have and addtion to the family. Sure, they want more kids, so why not... after all, it is a reputable bank and the loans manager IS an economist and really knows his stuff... and to compound the travesty, they're sent off to a 'friendly' property settlement lawyer who OK's the purchase of a $220k house instead of the $150k one they went there for... and why not, they're both working and finances are pretty good....
Next thing, the wife falls pregnant (remember, they wanted more kids) and she has to give up working due to complications. That's a blow but they're still alright, what with his income and their $90k equity in the home, but then his income drops, interest rates soar and the cost of living rises sharply.... now (6 years later) they're in trouble. Not only does the bank foreclose, they also lose their $90k equity to unpaid 'higher' interest.
Again, a hypothetical, but that was happening all over as well, people going for smaller mortgages but being tricked into much larger ones by so-called 'reputable banks' with 'conmen economists' as frontmen! It was as if the banks knew the arse was going to fall out of the market/banking sector, and so went on a crusade to sign up whoever they could before the total collapse came. So! Were these people gullible or trusting... and not so much trusting of the conmen, they didn't know they were going to see one, but rather of the institutions that had faithfully served the public for generations before them?
Throws a different light on it, doesn't it?