Gresham's Law: "Bad money drives out good."

As applied to mortgages: "Bad business practices drive out good ones."

It's easy to see why. Danny Westneat interviewed Jim Petersen, account executive for the mortgage arm of World Savings (an old and established outfit that collapsed) :

Every day in mortgage mania, his staid firm would lose business to lenders offering sweeter, riskier deals.

"You lose enough of your market share and eventually you lower your standards, too," he said.

-- Memories of Mortgage Mania by Danny Westneat, Seattle Times, September 28, 2008