Is the fed responsible for that one too? I really haven't found any literature blaming the government for it, only the subsequent actions that led to the housing bubble.
I only kind of understand this. I know that the Federal Reserve creates bubbles whenever it lowers interest rates because people think there's more wealth around than there really is, but I don't think they purposefully create bubbles in specific sectors of the economy. It's just whatever is new or needed at the time when interest rates are low.
When it comes to bubbles the two questions are "why did they think this would profit?" and "where did they get the money to invest?"
You can also ask what was going on politically. At that time the Federal Funds Rate was close to the level before the housing crash. Also, there was supposedly a "balanced budget" that would lower the deficit.
For me the question is who thought the internet was going to be profitable. We now know that it can be so I think that maybe it could be a factor of investors forgetting the fundamentals during a credit drunken boom. As in, no one asks WHY these website are going to make money and just assumes they will much like the real estate boom.
"In a modern democracy, no matter whom you vote for, the government always gets elected" -Christopher Westley
It has already been covered here: http://mises.org/journals/qjae/pdf/qjae6_2_3.pdf
Warning! It's pretty long read so you may want to download the file and read it a bit at the time.