Watching the meltdown in the subprime mortgage market over the past year, I could not help but be reminded other recessions and industry meltdowns. The junk bond scandals of the 1980's, the Savings and Loan crisis in the early 1990's, the collapse of the Russian bond market and Asia crisis in the late 1990's, and the Enron debacle of the early part of the twenty-first century have apparently taught lenders and investors absolutely nothing.

The most important difference between these other scandals and the ongoing foreclosure crisis, though, is how deeply personal this crisis is to homeowners losing their homes. A drop in the value of their 401(k) or other investments is certainly disturbing, but finding out that one has been a victim of the most incompetent lending practices of recent memory and that has led to an inability to stop foreclosure is another matter entirely.

When other markets were heavily leveraged or securitized, the inevitable bursting of the speculative bubble was largely isolated to a specific market or industry. When internet and tech stocks collapsed in 2000 and 2001, the average homeowner in, say Ohio, was not as affected as the state of California. When the Russian currency collapsed in the late 1990's, there was no widespread concern about the American dollar.

Even other hedge funds that collapsed in the past did not engender the same amount of financial concern as the foreclosure problem. Long-Term Capital Management, a hedge fund that was bailed out by the Federal Reserve in the 1990's, was interested mainly in the Asian and Russian markets, and the collapse of the fund was a reflection of the weakness of those markets, rather than the American economy.

But the lessons of these other collapses have apparently not been learned by lenders or investors. Or, maybe, they have been learned all too well, and it is the average consumer and homeowner who has not learned enough.

When interest rates were lowered as a result of the recession of 2000 and the attacks of 9/11/2001, banks had a decision to make. And they actively, voluntarily, with no compulsion, decided to pull the trigger. What was that decision?

They decided that they would offer mortgages to nearly anyone who wanted one, whether they could qualify for it or not. In fact, they offered mortgages even to people who could not or simply did not want to prove to the bank that they made any income, let alone enough income. And the banks made billions of dollars from this quite illogical decision.

Once they originated the subprime, ticking time bomb loans, the banks would simply package them together and sell them as securities in the market. Hedge funds, who invest in the riskiest markets possible, ate up these mortgage-backed securities and could not get enough. Because of the rising real estate market, they believed there was no chance of loss.

In the first place, the loan payments were guaranteed to rise, with adjustable rate mortgages. Hedge funds could buy loans with low interest rates and sit on them for a few years until the rates automatically adjusted. And, if the homeowners could not afford the payment, there were no worries at all. They could simply sell the foreclosure properties for even larger returns, after eating up as much of the equity as possible. It was a no-lose situation for banks and investors.

The large banks, of course, knew that real estate prices would keep rising, since they control the money supply through their control of the Federal Reserve System. Lower the rates, give everyone a loan, and let the market spread the newly-created inflationary wealth around.

Then, raise the rates, watch as homeowners were unable to stop foreclosure because their home values dropped, and simply take back all the of the real estate. In this way, banks now own vast amounts of real estate throughout the country that was purchased at severe discounts through county foreclosure auctions.

The hedge funds who were willingly complicit in the scheme? Well, they got a free bailout of their toxic collateralized debt obligations. A few people lost jobs, homeowners and consumers lost wealth in their pensions and retirement accounts, but the offending companies were able to use that inflated money to keep operating with no real consequences. A free market would have punished such awful lending and investing decisions, but the semi-government intervention saved the funds from having to make good decisions in the future.

So, maybe I was wrong: the banks learned the lessons of these other market collapses all too well. Instead of wiping away the wealth of investors in the internet industry, or certain energy companies, or foreign bond markets, the lenders decided that the newest target would be more massive than any before. The homeowners of America who purchased or refinanced within the last seven years are now all caught in the trap of getting a loan on an extremely over-valued property, and many owe more than the house is worth.

The real estate value is gone. For many foreclosure victims, the house is gone. And even rents are increasing in many parts of the country, at a time when job quality is deteriorating and food and transportation costs are rising.

So now, we should ask ourselves, what will be the next bubble to burst? And who will be the unfortunate victims?