In hindsight, who is most to blame for the Financial Crisis?

[CA renter]

[quote=HLS]The list of the most responsible in declining order:
Govt: allowed “IT” to happen without intervention.
The drug cartel
The growers
The middlemen
The dealers
The street pushers
The users

Nobody held a gun to the end user and made them inject/snort. If the govt had required skin in the game over 50% of mortgages would have never occurred. 100% financing was THE main cause.
Greenspan and low rates weren’t the problem.
Rates are lower today and there is no housing bubble.

The true criminals: Barney Frank, Chris Dodd, etc.
Hanky Panky Paulson did a perfect job of raping the taxpayer without using KY jelly and transferred wealth to his Wall Street buddies.
AIG was given billions so that Goldman Sachs could be paid for gambling on CDS’ and Lehman Bros was allowed to fail because they annoyed/crossed Paulson on the way up.

Never forget: Foreclosures are not the problem- Foreclosures are the solution. HLS[/quote]

Very much agree with this and with UCGal’s post.

The only thing we differ on, HLS, is the effects of low rates on the housing market — or asset prices, in general.

Low rates encourage more risk taking as investors go further out on the risk curve in the pursuit of higher yields. This is what facilitates easy lending. IMHO, when rates are high, cash is more valuable, and investors will be more circumspect WRT where and with whom they invest or lend.

Even though credit might be “tight” right now, the low rates are forcing investors/savers into the housing market. IMHO, many/most of these all-cash investors we keep hearing about are chasing the market because they can get a higher yield via rentals (all-cash purchases) versus any kind of bond or savings vehicle with an equivalent risk profile.

Also, since lower rates initially allow more buyers to enter the market (until prices rise to make up for the difference), demand can be increased in a low-rate environment.

[CA renter]

[quote=Rich Toscano]I like sdduuuude’s answer, but I have to put Greenspam first and the ratings agencies second.

The agencies were the lynchpin to the whole mortgage crisis, so they bear huge responsibility there. However, Greenspam was asleep at the wheel for not one but two world-beating asset bubbles. No, scratch that — he wasn’t just asleep at the wheel, he was a cheerleader for both bubbles. And the mop-up from the first bubble basically created the environment that allowed the second and much worse bubble.

His “reign” was truly catastrophic and I just hope he clings to life for long enough to witness the final outcome of his legacy (the nigh-inevitable US govt funding crisis) and, if there is any justice, the resulting complete destruction of his reputation as a central banker.

Rich[/quote]

Great post, Rich. 🙂

Yes, Greenspan is the #1 culprit because (IMHO) he probably had a hand in every aspect of the bubble. He cheered on the “financial innovation” that made the bubble possible, and I’m sure he well understood what the possible ramifications would be.

I’m sure he personally knows people within the ratings agencies, and he certainly knows people who work for the various regulatory agencies, and he certainly knows people who work for the largest financial institutions in the nation/world. There is no way these topics didn’t come up in formal or informal conversations during the early years of the bubble. This is why I don’t believe for a second that “nobody saw it coming.” Everybody who was anybody knew exactly what was going to happen, but they were all making so much money, nobody dared to stop the bubble in its tracks.

Yes, the ratings agencies are at the top of the list, but I also think that “innovation” that supposed reduces risk by “spreading it out” (does that make it “systemic”???) is one of the biggest causes of the final, blowout stages of the bubble. The two are interconnected because the ratings agencies took the derivatives into consideration when rating the securities.

Financial insurance should not exist, IMHO. It gives investors a false sense of security, and hides the true cost of the risks that are being taken. We didn’t see risk priced in the bond market (higher interest rates) because the **opaque** derivatives market was (supposedly) absorbing that risk. If I were god of the financial sector, I would ban derivatives with the exception of a very small market that is closely regulated and monitored.

[CA renter]

[quote=Rich Toscano]I like sdduuuude’s answer, but I have to put Greenspam first and the ratings agencies second.

The agencies were the lynchpin to the whole mortgage crisis, so they bear huge responsibility there. However, Greenspam was asleep at the wheel for not one but two world-beating asset bubbles. No, scratch that — he wasn’t just asleep at the wheel, he was a cheerleader for both bubbles. And the mop-up from the first bubble basically created the environment that allowed the second and much worse bubble.

His “reign” was truly catastrophic and I just hope he clings to life for long enough to witness the final outcome of his legacy (the nigh-inevitable US govt funding crisis) and, if there is any justice, the resulting complete destruction of his reputation as a central banker.

Rich[/quote]

Great post, Rich. 🙂

Yes, Greenspan is the #1 culprit because (IMHO) he probably had a hand in every aspect of the bubble. He cheered on the “financial innovation” that made the bubble possible, and I’m sure he well understood what the possible ramifications would be.

I’m sure he personally knows people within the ratings agencies, and he certainly knows people who work for the various regulatory agencies, and he certainly knows people who work for the largest financial institutions in the nation/world. There is no way these topics didn’t come up in formal or informal conversations during the early years of the bubble. This is why I don’t believe for a second that “nobody saw it coming.” Everybody who was anybody knew exactly what was going to happen, but they were all making so much money, nobody dared to stop the bubble in its tracks.

Yes, the ratings agencies are at the top of the list, but I also think that “innovation” that supposed reduces risk by “spreading it out” (does that make it “systemic”???) is one of the biggest causes of the final, blowout stages of the bubble. The two are interconnected because the ratings agencies took the derivatives into consideration when rating the securities.

Financial insurance should not exist, IMHO. It gives investors a false sense of security, and hides the true cost of the risks that are being taken. We didn’t see risk priced in the bond market (higher interest rates) because the **opaque** derivatives market was (supposedly) absorbing that risk. If I were god of the financial sector, I would ban derivatives with the exception of a very small market that is closely regulated and monitored.

[CA renter]

[quote=Rich Toscano]I like sdduuuude’s answer, but I have to put Greenspam first and the ratings agencies second.

The agencies were the lynchpin to the whole mortgage crisis, so they bear huge responsibility there. However, Greenspam was asleep at the wheel for not one but two world-beating asset bubbles. No, scratch that — he wasn’t just asleep at the wheel, he was a cheerleader for both bubbles. And the mop-up from the first bubble basically created the environment that allowed the second and much worse bubble.

His “reign” was truly catastrophic and I just hope he clings to life for long enough to witness the final outcome of his legacy (the nigh-inevitable US govt funding crisis) and, if there is any justice, the resulting complete destruction of his reputation as a central banker.

Rich[/quote]

Great post, Rich. 🙂

Yes, Greenspan is the #1 culprit because (IMHO) he probably had a hand in every aspect of the bubble. He cheered on the “financial innovation” that made the bubble possible, and I’m sure he well understood what the possible ramifications would be.

I’m sure he personally knows people within the ratings agencies, and he certainly knows people who work for the various regulatory agencies, and he certainly knows people who work for the largest financial institutions in the nation/world. There is no way these topics didn’t come up in formal or informal conversations during the early years of the bubble. This is why I don’t believe for a second that “nobody saw it coming.” Everybody who was anybody knew exactly what was going to happen, but they were all making so much money, nobody dared to stop the bubble in its tracks.

Yes, the ratings agencies are at the top of the list, but I also think that “innovation” that supposed reduces risk by “spreading it out” (does that make it “systemic”???) is one of the biggest causes of the final, blowout stages of the bubble. The two are interconnected because the ratings agencies took the derivatives into consideration when rating the securities.

Financial insurance should not exist, IMHO. It gives investors a false sense of security, and hides the true cost of the risks that are being taken. We didn’t see risk priced in the bond market (higher interest rates) because the **opaque** derivatives market was (supposedly) absorbing that risk. If I were god of the financial sector, I would ban derivatives with the exception of a very small market that is closely regulated and monitored.

[CA renter]

[quote=Rich Toscano]I like sdduuuude’s answer, but I have to put Greenspam first and the ratings agencies second.

The agencies were the lynchpin to the whole mortgage crisis, so they bear huge responsibility there. However, Greenspam was asleep at the wheel for not one but two world-beating asset bubbles. No, scratch that — he wasn’t just asleep at the wheel, he was a cheerleader for both bubbles. And the mop-up from the first bubble basically created the environment that allowed the second and much worse bubble.

His “reign” was truly catastrophic and I just hope he clings to life for long enough to witness the final outcome of his legacy (the nigh-inevitable US govt funding crisis) and, if there is any justice, the resulting complete destruction of his reputation as a central banker.

Rich[/quote]

Great post, Rich. 🙂

Yes, Greenspan is the #1 culprit because (IMHO) he probably had a hand in every aspect of the bubble. He cheered on the “financial innovation” that made the bubble possible, and I’m sure he well understood what the possible ramifications would be.

I’m sure he personally knows people within the ratings agencies, and he certainly knows people who work for the various regulatory agencies, and he certainly knows people who work for the largest financial institutions in the nation/world. There is no way these topics didn’t come up in formal or informal conversations during the early years of the bubble. This is why I don’t believe for a second that “nobody saw it coming.” Everybody who was anybody knew exactly what was going to happen, but they were all making so much money, nobody dared to stop the bubble in its tracks.

Yes, the ratings agencies are at the top of the list, but I also think that “innovation” that supposed reduces risk by “spreading it out” (does that make it “systemic”???) is one of the biggest causes of the final, blowout stages of the bubble. The two are interconnected because the ratings agencies took the derivatives into consideration when rating the securities.

Financial insurance should not exist, IMHO. It gives investors a false sense of security, and hides the true cost of the risks that are being taken. We didn’t see risk priced in the bond market (higher interest rates) because the **opaque** derivatives market was (supposedly) absorbing that risk. If I were god of the financial sector, I would ban derivatives with the exception of a very small market that is closely regulated and monitored.

[CA renter]

[quote=Rich Toscano]I like sdduuuude’s answer, but I have to put Greenspam first and the ratings agencies second.

The agencies were the lynchpin to the whole mortgage crisis, so they bear huge responsibility there. However, Greenspam was asleep at the wheel for not one but two world-beating asset bubbles. No, scratch that — he wasn’t just asleep at the wheel, he was a cheerleader for both bubbles. And the mop-up from the first bubble basically created the environment that allowed the second and much worse bubble.

His “reign” was truly catastrophic and I just hope he clings to life for long enough to witness the final outcome of his legacy (the nigh-inevitable US govt funding crisis) and, if there is any justice, the resulting complete destruction of his reputation as a central banker.

Rich[/quote]

Great post, Rich. 🙂

Yes, Greenspan is the #1 culprit because (IMHO) he probably had a hand in every aspect of the bubble. He cheered on the “financial innovation” that made the bubble possible, and I’m sure he well understood what the possible ramifications would be.

I’m sure he personally knows people within the ratings agencies, and he certainly knows people who work for the various regulatory agencies, and he certainly knows people who work for the largest financial institutions in the nation/world. There is no way these topics didn’t come up in formal or informal conversations during the early years of the bubble. This is why I don’t believe for a second that “nobody saw it coming.” Everybody who was anybody knew exactly what was going to happen, but they were all making so much money, nobody dared to stop the bubble in its tracks.

Yes, the ratings agencies are at the top of the list, but I also think that “innovation” that supposed reduces risk by “spreading it out” (does that make it “systemic”???) is one of the biggest causes of the final, blowout stages of the bubble. The two are interconnected because the ratings agencies took the derivatives into consideration when rating the securities.

Financial insurance should not exist, IMHO. It gives investors a false sense of security, and hides the true cost of the risks that are being taken. We didn’t see risk priced in the bond market (higher interest rates) because the **opaque** derivatives market was (supposedly) absorbing that risk. If I were god of the financial sector, I would ban derivatives with the exception of a very small market that is closely regulated and monitored.

[scaredyclassic]

it was a happly little eco-system of gain, a money-machine with different people making different sized piles of money, some of which was pretend.

[scaredyclassic]

it was a happly little eco-system of gain, a money-machine with different people making different sized piles of money, some of which was pretend.

[scaredyclassic]

it was a happly little eco-system of gain, a money-machine with different people making different sized piles of money, some of which was pretend.

[scaredyclassic]

it was a happly little eco-system of gain, a money-machine with different people making different sized piles of money, some of which was pretend.

[scaredyclassic]

it was a happly little eco-system of gain, a money-machine with different people making different sized piles of money, some of which was pretend.

[DWCAP]

[quote=poorgradstudent]There is no one real source of blame for the housing bubble and financial crisis. There were people who could have done something to stop it (Clinton and Bush administrations, Congress (either party at various points in time), Greenspan). There were regulatory agencies with no teeth that set policies in place that encouraged banks to make risky loans. There were homebuyers that stated more income than they made, and banks that didn’t bother checking those claims. There were some very smart math nerds at banks that made a very fatal error when averaging out risk, ignoring the possibility of systemic risk.

This is what makes it so frustrating for the average american. There’s no easy scapegoat. It’s easy to paint your own personal politics onto it. Republicans can blame Fannie, Freddie, the Democrats and poor people. Democrats can blame Bush, the Big Banks, Republicans, and individual greed. The truth is a lot of people screwed up.[/quote]

+1. You summed up what I was trying to write very well. I still to this day dont understand why Americans cant seem to grasp the idea that sometimes everyone involved is to blaim. That sometimes it isnt evil people doing nafarious deeds, but rather alot of good people doing stupid things.

[DWCAP]

[quote=poorgradstudent]There is no one real source of blame for the housing bubble and financial crisis. There were people who could have done something to stop it (Clinton and Bush administrations, Congress (either party at various points in time), Greenspan). There were regulatory agencies with no teeth that set policies in place that encouraged banks to make risky loans. There were homebuyers that stated more income than they made, and banks that didn’t bother checking those claims. There were some very smart math nerds at banks that made a very fatal error when averaging out risk, ignoring the possibility of systemic risk.

This is what makes it so frustrating for the average american. There’s no easy scapegoat. It’s easy to paint your own personal politics onto it. Republicans can blame Fannie, Freddie, the Democrats and poor people. Democrats can blame Bush, the Big Banks, Republicans, and individual greed. The truth is a lot of people screwed up.[/quote]

+1. You summed up what I was trying to write very well. I still to this day dont understand why Americans cant seem to grasp the idea that sometimes everyone involved is to blaim. That sometimes it isnt evil people doing nafarious deeds, but rather alot of good people doing stupid things.

[DWCAP]

[quote=poorgradstudent]There is no one real source of blame for the housing bubble and financial crisis. There were people who could have done something to stop it (Clinton and Bush administrations, Congress (either party at various points in time), Greenspan). There were regulatory agencies with no teeth that set policies in place that encouraged banks to make risky loans. There were homebuyers that stated more income than they made, and banks that didn’t bother checking those claims. There were some very smart math nerds at banks that made a very fatal error when averaging out risk, ignoring the possibility of systemic risk.

This is what makes it so frustrating for the average american. There’s no easy scapegoat. It’s easy to paint your own personal politics onto it. Republicans can blame Fannie, Freddie, the Democrats and poor people. Democrats can blame Bush, the Big Banks, Republicans, and individual greed. The truth is a lot of people screwed up.[/quote]

+1. You summed up what I was trying to write very well. I still to this day dont understand why Americans cant seem to grasp the idea that sometimes everyone involved is to blaim. That sometimes it isnt evil people doing nafarious deeds, but rather alot of good people doing stupid things.

[DWCAP]

[quote=poorgradstudent]There is no one real source of blame for the housing bubble and financial crisis. There were people who could have done something to stop it (Clinton and Bush administrations, Congress (either party at various points in time), Greenspan). There were regulatory agencies with no teeth that set policies in place that encouraged banks to make risky loans. There were homebuyers that stated more income than they made, and banks that didn’t bother checking those claims. There were some very smart math nerds at banks that made a very fatal error when averaging out risk, ignoring the possibility of systemic risk.

This is what makes it so frustrating for the average american. There’s no easy scapegoat. It’s easy to paint your own personal politics onto it. Republicans can blame Fannie, Freddie, the Democrats and poor people. Democrats can blame Bush, the Big Banks, Republicans, and individual greed. The truth is a lot of people screwed up.[/quote]

+1. You summed up what I was trying to write very well. I still to this day dont understand why Americans cant seem to grasp the idea that sometimes everyone involved is to blaim. That sometimes it isnt evil people doing nafarious deeds, but rather alot of good people doing stupid things.

[Author]

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