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production line also includes almost $1 trillion in NTM lending by Countrywide
Financial under HUD’s Best Practices Initiative. 22
Figure 2. Th e Eff ect of Government Policies on the Growth of the Bubble
It is not true that every bubble--even a large bubble-- has the potential to
cause a fi nancial crisis when it defl ates. Th is is clear in Table 2 below, prepared by
Professor Dwight Jaff ee of the Haas Business School at U.C. Berkley. Th e table shows
that in other developed countries—many of which also had large bubbles during the
1997-2007 period—the losses associated with mortgage delinquencies and defaults
when these bubbles defl ated were far lower than the losses suff ered in the U.S. when
the 1997-2007 defl ated.
22 See note 144.
