I don’t think it’s super clear-cut. This may be an oversimplified analogy, but what if “experts” were engaged in the common practice of offering people cars held together with chewing gum? Would you believe them if they assured you it was safe?
Similarly, could we expect consumers to really intuit that they were taking out risky loans that were out of their limits?
I was asking him a question, and an answer would be nice. Anyway, most people know enough about cars and chewing gum to know holding a vehicle together with BubbleYum would be a poor idea. A better analogy is going to a mechanic because your car is having troubles or perhaps to help prolong the life of your vehicle, taking the mechanic’s non-ridiculous advice, then having your car blow up.
I don’t believe blame is zero sum. Making it one party’s fault doen’t make it any less of another party’s fault.
That’s true, but it doesn’t mean that there are not different levels of blame, right? Two people can both have some responsibility for something, while one of them is more responsible than the other. So it’s still a potentially useful exercise.
It is your job to vet the advice you are given. If someone gives you bad advice and you don’t do your homework and simply take their word for it, I don’t have a lot of sympathy if the advice turns out to be bad. In this case, this isn’t some arcane super-duper complicated stuff. You have your current savings and current income (both current and projected). You have a mortgage, that requires $X amount down and $Y amount per month. Factor in some risk allowing for accidents, job losses, etc, and you can figure out if it makes sense to buy a house. And if you can’t, you don’t - there are plenty of rentals out there.
A lot of people believed what they wanted to believe and took on debt that left no room for error. Nobody put a gun to their heads and told them to sign on the dotted line.
It goes down to the funding of campaigns. There should be much shorter elections and nobody should be able to buy politicians. The Supremes keep pushing for more corporate interference in the election process as a right guaranteed by their being people. Start with throwing that out. Corporations are not people.
Agreed. But it’s still a democracy. We elect the representatives who appoint/elect the Supreme Court. All this has been under our control. We still deserve some of the blame. Even if you didn’t vote for those guys, your choice is to participate in the democracy, enjoy its benefits, suffer its faults, or go live somewhere else.
My understanding of it is that the crisis had a lot of proximate causes, and most of the people responsible were not acting in bad faith. The list includes:
Greenspan’s policies at the Fed. Low interest rates probably encouraged a number of bubbles, including the housing bubble. It made residential mortgages an attractive investment.
The growth of Asia. From 1993-2006, a number of Asian countries experienced wild growth, leading to what This American Life called “The Giant Pool of Money” which ultimately encouraged massive investment in residential mortgages.
Good old-fashioned ignorance. This includes both consumer ignorance among the people who took out loans they couldn’t afford, and ignorance among people who incorrectly thought that home prices were legitimately rising and would do so infinitely. It also includes ignorance on Wall Street about how CDOs worked, and how risky they were. Finally, this category also includes the failure of imagination to ask what would happen if a firm like AIG failed and prepare for that possibility.
Federal policies on housing. Federal policies subsidizing home ownership fed the housing bubble, and eventually (though somewhat late in the game) Fannie and Freddie got in on the act which made the situation worse.
Dishonest bankers. When mortgages became a hot item, many lenders changed their lending practices so they could issue more mortgages. Some had neutral intentions. But others committed fraud, or at least knew that the loans they were making were riskier than they let on to either the lendee or the company purchasing the loan. Similarly, there were people on Wall Street who turned a blind eye to the risks created by home asset CDOs, knowing that they would benefit short-term.
Conflicts of interest. Part of the reason home asset CDOs were not identified as the massive risk they were was because credit rating agencies had an interest in not assessing them properly.
A Wall Street culture too focused on the short-term. The rewards in the financial industry for most people employed there (who didn’t have a million dollars to place bets), did not go to people who would sit down and question the wisdom of home asset CDOs or current lending practices.
Bank leverage problems. Banks made bad decisions with respect to their leverage rations. A combination of general overleveraging caused by other factors and the rise of credit default swaps made financial institutions uniquely vulnerable to the popping of the housing bubble.
Lack of regulation. There should have been better regulation of everything from lending standards to transparency regarding CDOs, and a number of things in between. There wasn’t both because of deregulation and because of a failure to keep up with financial innovation. There was also a failure to enforce what regulations did exist, in part because the SEC is very much subject to regulatory capture. This includes the repeal of Glass-Stegall, which contributed to “Too Big to Fail.”
If I had to assign blame points, I would assign them in equal measure based on whether the agent acted with bad intentions and how much each agent was responsible. So, for example, China bears no blame for making a bunch of people rich. Greenspan bears a little blame for being so ideological. Dishonest lenders should get a lot of blame, even though they were only a small part of the responsibility.
The money in politics is corrupting. When an idealist, who really wants to fix things, starts running he has to raise tons of money. Who gives large amounts of money without expecting something in return?
Once they are elected, they have a half time job of collecting money. They have fund raisers regularly. They entertain the rich in their offices. They golf and eat with them. The system as it is is going to corrupt almost anybody.
We have to take the money out of politics if we want it to serve the country.
Larry Summers Robert Rubin & Alan Greenspan have to take some responsibility for opposing regulation of the derivatives market.
The Community Reinvestment Act and Clinton and Bushadministrations pressure on lenders to increase home ownership amongst those with poor credit histories.
I suppose we could usefully separate the meltdown into different categories:
(1) Responsibility for the housing bubble
(2) Responsibility for the mortgage-backed CDOs and credit default swaps and inaccurate assessment thereof
(3) Responsibility for the firms threatened by toxic assets to be so overleveraged that they would fail
(4) Responsibility for the situation in which the failure of the firms that made bad decisions could not be permitted without complete meltdown
Different agents were responsible for different elements.
That Court decision has also allowed labour unions to do the same thing. And corporations are not automatically GOP-Buffet is a Democrat for example.
IMO, I think the proximate cause was the securitization of mortages and the subsequent sales that removed the risk from the loan generators, and this was allowed by the repeal of Glass-Steagall.
So… 20 points to the banks that thought that securitizing loans was a good idea.
20 points to the banks that made retarded loans because they wouldn’t actually see the risk
30 points to the cretins that repealed Glass-Steagall
10 points to the modern-day regulators who failed to recognize the possible problems posed by the securitization and sale of mortgages (such as the bubble & the subsequent crash).
20 points to the dumb-ass banks that got overleveraged.
Using the same five categories or classes, my points are “awarded” as 15-15-20-25-25.
I cut the government’s share from 20 to 15 because allowing something to be done doesn’t make people do it. :rolleyes:
People pushing expensive homes and risky mortgages for a living know more about the risks than their customers who don’t buy houses or write mortgages for a living. :smack: The former should bear a bigger share of the blame than the latter while not in the least letting the latter off the hook; hence my middle 15-20.
Note that “pushing … overly risky mortgages” includes the banks as does the “banks repackaging securities and CDOs”. Splitting the middle 20 between real estate agents (and the like) and banks/mortgage companies/etc., I go 5-15. Bankers are supposed to be stodgy and respectable, while real estate agents are expected to, umm, get caught up in the excitement of the deal. 
So the banks and related businesses get an overall 40 percent of the blame in my book.
My understanding of the factors that led to this problem:
Regulation changes under Clinton like repealing Glass-Steagall.
Regulation changes under Bush (changing SEC and leveraging rules). Also under Bush Eliot Spitzer said his efforts to prosecute mortgage fraud by the banks were blocked by the administration.
The rating agencies for being co-opted and labeling shitty products as AAA (the collapse couldn’t have happened w/o them)
Banks for making terrible loans integral into the US economy by breaking them up and spreading them everywhere
The fed for easing money supply which made housing easier to get
Consumers who bought houses they couldn’t afford.
Banks who pushed shitty loans on people who couldn’t afford them. Or banks who pushed people who could afford prime loans into subprime loans because they made more money that way.
No idea how I’d split that up. But those are the major players from what I know.
all to Congress. they were warned about derivatives and problems with Fannie Mae and did nothing.
I blame 100 percent on the American consumer.
Live within your means and only buy what you can afford.
I have no sympathy for people who can’t understand simple economics and end up broke in the gutter due to their own stupidity for buying things they can’t afford.
Even if every borrower in America had been in over their head on a subprime mortgage that alone couldn’t have collapsed the economy.
I’m surprised how many people are giving Reagan a pass and think that deregulation started under Clinton. Reagan signed the Garn-St. Germain Depository Institutions Act in 1982 and deficit spending ballooned during his term.
OK, people, I doubt any President had anything to do with it directly or indirectly. Glass-Steagall was a miserable pile of legislation which at worst had some teritary impact. The financial sector hasn’t been particularly deregulated, and those things which were deregulated weren’t the problem, and were deregulated because those rules were increasinlgy painful or irrelevant.
The basic problem was that
(a) The housing market was in a very large bubble. It may have been slightly the Fed’s fault for not popping it, but the problem with bubbles is that it’s almost impossible to know you’re in one.
(b) CDS’s were badly administered. Note that this doesn’t really change the basic problem, and doesn’t even make it much worse; it simply adds a layer of confusion on top.
© FMA and FMC were engaging in some decidedly shady practices, made possible by their dubious quasi-government status (itself a result of decisions made by Congresses long past) and powerful connections.
Stop trying to assign blame, beacuse that’s merely a political excercise. The problem was way bigger than any one person, or any five people, or even any five organizations.