An American walks into a bank and obtains a mortgage loan he can’t afford—be it an ARM, interest only, or even a 30-year fixed. Because of the risky loan, he’s able to pay more for a house than he otherwise would have.

If he hadn’t obtained a mortgage on the house he wanted, it seems he’d have been left with three choices: continue renting his apartment, continue living in his smaller and more modest house, or try to get a smaller loan to buy the house he can afford.

Instead, he stretched and bought the pricey house. Isn’t it true that, on the aggregate, lending practices that permitted/encouraged such risky personal finance decisions, along with low interest rates and perverse tax incentives, drove up housing prices all across the country? The bank failures, foreclosures, and government bailout seem to have demonstrated that some are now paying for their risks. But the connection seems not to have been made, at least at levels that matter, by people willing to employ honest diction, that these risks and policies led to artificially high housing prices. And artificially high housing prices encouraged/permitted all sorts of other things, such as increased rates of borrowing against real equity, a real estate derivatives market frenzy, and a land craze not seen since the Homestead Act.

The tax incentives and low interest rates will unlikely remain with us, but risky lending most likely will disappear into the nooks and crannies from which it recently emerged—at least for a while. The hard truth seems to be that the economy was humming far faster than it should have been, and when we finally reckon with its tune, our houses and portfolios will be worth much less than before. But this is not something the government can or should fix. The realignment of worth and value has all sorts of virtues. If only it could pay off the bills we’ve been racking up.