Last week marked the three-year anniversary of New Century Financial filing Chapter 11 bankruptcy, an event that I tend to point to as demarcating "the beginning of the end" and "the end" of the housing bubble, and representing the true beginning of the credit crisis.

Until first quarter 2007, New Century Financial stood as the second-largest US subprime residential mortgage lender (after Countrywide), having contributed significantly to the awe-inspiring $500-plus billion in subprime loans made in 2006. However, faced with a funding deficit when New Century’s lenders pulled back amid rising defaults on subprime loans, the company ceased lending operations in early March, 2007. The inevitable Chapter 11 filing followed quickly on April 2.

A look through the archives of the media-coverage during this period reflects that the market still did not, at this point, realize the contagion effect that the subprime meltdown would have. The Wall Street Journal wrote in a March, 2007 story on New Century’s troubles:

Wall Street firms and big banks stand to gain in some ways from the troubles of subprime lenders, even as they take some hits on loans and securities. The turmoil is reducing the number of competitors in what was until recently a very lucrative business.

It was just this kind of thinking that drove the Dow Jones to its all-time high some 7 months after New Century’s bankruptcy. Reality, of course, was a good bit more grim – just twelve months after New Century’s bankruptcy, one of its largest creditors – Bear Stearns – would be sold for $2 a share; Six months after that Merrill Lynch – one of the big banks expected to benefit from New Century’s failure – would be acquired by Bank of America in a fire sale during the dark days of September, 2008.

Hindsight, it is said, explains the injury that foresight would have prevented – although it’s not at all clear to me that any greater clarity of foresight would have entirely prevented the events of these past three years.