Professor William Black:

It is absolutely a tell, and it is why the recipe is so dangerous in hyper-inflated bubbles. The first ingredient of the recipe is "Grow like crazy," and this is met if rents are already declining and there is an abundance of what we call see-through buildings, which are those that have been constructed have no occupants, but the bank keeps on lending. That was exactly the experience in the savings and loan debacle, which is one of the parallels. This is a superb device for hyper-inflating the bubble. It was absolutely done in the United States in the current crisis. We have excellent numbers showing that it was liar loans that grew by over 500% from 2003 to 2006. They became 40% of all residential loans in the United States while conventional lending was falling sharply. We know the marginal loans that hyper-inflated the bubble were these fraudulent loans. We have data showing that 90% of liar loans are fraudulent in the United States. They will be the worst loans, and the lenders will continue to lend even when the stagnation is obvious. Akerlof and Romer talk about that explicitly in their paper. It is a sure tell.