September 29, 2008
Financial Crisis 2008: Solution, anyone?
Something to keep in mind as all of this political and financial turmoil plays out: This has been coming for a long time. Bear Stearns, Lehman, Wachovia, Washington Mutual, Merrill Lynch, FNMA, FHMC, and all the other large banks that have failed should be signal enough that something is systemically wrong.
That the banks were over leveraged and made a bunch of bad decisions is given. However, they were allowed to make those bad decisions by the regulatory environment that was allowed to persist by the elected folks in Washington that were looking out for our best interests. Those same folks have largely sat on their hands for the past several months. At the same time the ratings agencies are to blame for rating the mortgage-backed securities as safer than they actually were. Mortgage lenders are to blame for giving out loans to people that couldn't afford them. Borrowers are to blame for lying on forms and borrowing more money than they could afford. Home builders are to blame for building many more houses than could be sold, helping to drive home prices down. The media is to blame for not investigating further than political talking points. Stock traders are to blame for relentlessly bashing the stock of companies that were in a bad position, but may have been able to survive without having their stock price pushed toward zero.
There's plenty of blame to go around, but that's not what's important right now. Let's work on keeping the ship afloat before we worry about who needs to walk the plank.