McCulley on the Causes of the Crisis

To be sure, there is a correlation between low interest rates and rising home prices, but that correlation is not equivalent to causation. In my view, the evidence is much more persuasive that the primary villain in the bubble was ever-more lax underwriting standards for mortgage creation, facilitated by the unholy trinity of the originate-to-distribute business model, explosive growth in the shadow banking system, and complicit rating agencies. Had it not been for these enabling factors, the bubble would not have inflated – or subsequently deflated – as violently as it did.

Paul McCulley, Pimco, 9.09