Lunch, With A Side of Hurt

Wow, you sure have bought into the McCain/conservative "explanation" of the mess, lock, stock, and barrel. If only it were so simple - and so easy to lay blame. Too bad it's not true. And please don't tell me you don't know a single person who got caught up in the greed during the housing bubble. Every single one of us knows someone - or two or ten, if not ourselves - who shopped till they dropped, and counted on rising housing prices to keep their debt-fueled lifestyles going. But please, lay the blame where it deserves to be laid - on Wall Street. Without them, the sizable down payments and other requirements (income, anyone?) would never have disappeared.

James, in his post above, says "Thank God the Clinton administration relaxed the lending laws..." Clinton continued the policy of deregulating the banking industry. Deregulation also decriminalizes certain practices. When the regulation was removed, the oversight and any enforcement measures went with it.

James says "Banks were forced to approve loans..." Banks, like all corporations, are in business to make a profit. James is suggesting that banks were forced to make loans against their own best interest. Or the banks were forced to become a failure. The question now is how do you force a deregulated bank to compromise its own survival? To force, suggests that someone or something was regulating or directing the bank's behavior in conflict with its profit driven instincts.

The only way to override the bank's need to make a profit is to assure the bank upfront that it will be more than compensated and covered for any losses as a result of taking on such huge risks. The banks would not have stepped out there without some reassurance from someone that there would be some safety net in place to minimize the risks. The need to stay profitable is just too strong to overcome any other way.

The housing crisis is the inevitable result of the bubble. The bubble is the result of the monetary policy of the Federal Reserve.

In reality, all three parties share the blame - the low income lending laws, sheisty wall street types, and the Fed. But I would argue that the nexus of the whole thing was the Fed causing people to make bad decision because they thought the market was only going to go up.