The pie is smaller because of a government attempt to make life "fair" for those on the bottom. Changing lending laws to make loans of all types available to people who shouldn't have gotten them in the first place caused the mess we're in. The laws were changed because the conservatives in Congress gave in to the Liberals to pacify them and shut them up about their "class wars" bashing.

Once the laws were changed they were open to everyone to say "me too, I'll take some of that easy money. We gave in to giving people who didn't earn the right to low interest loans and opened Pandora's box.