Paul Krugman's The Conscience of a Liberal 7

In my latest reading of The Conscience of a Liberal, Paul Krugman refers to a study by Elizabeth Warren and business consultant Amelia Warren Tyagi (who is also Elizabeth Warren's daughter) concerning bankruptcy in the U.S.  Krugman summarizes their findings on page 247:

"By 2005, just before a new law making it much harder for individuals to declare bankruptcy took effect, the number of families filing for bankruptcy each year was five times its level in the early 1980s.  The proximate reason for this surge in bankruptcies was that families were taking on more debt----and this led to moralistic pronouncements about people spending too much on luxuries they can't afford.  What Warren and Tyagi found, however, was that middle-class families were actually spending less on luxuries than they had in the 1970s.  Instead the rise in debt mainly reflected increased spending on housing, largely driven by competition to get into good school districts.  Middle-class Americans have been caught up in a rat race, not because they're greedy or foolish but because they're trying to give their children a chance in an increasingly unequal society.  And they're right to be worried: A bad start can ruin a child's chances for life."

This is very sobering.  And, although Warren and Tyagi wrote this study before the 2008 financial crisis, I'm curious as to whether their findings are in any way relevant to the sub-prime mortgages that led to that crisis.  A conservative lady once told me that the people who lost their homes should not be bailed out because they deserved what they got, for they were greedy, and the Bible condemns greed.  Aside from wondering why a right-wing conservative is suddenly critical of greed, I also question whether we should be so quick to judge those who tried to purchase homes that they could not afford.  Maybe some did so out of greed, but perhaps there were many who were just seeking a better future for their children, and they realized that the best schools were in the areas that had expensive homes.