Whose fault is the economic crisis anyway?

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So let’s look at how we got here:

ILLUSIONS

Big part of what makes the American Dream is hope. However unrealistic, uneducated, and misinformed choices replace hope with illusions.

Buyers had the illusion that homes would always keep increasing rapidly in value. However, they failed to understand that the real estate market has cycles. Some of the factors that create a change in the market are increased amounts of supply or demand, deregulation of the financial industry, easy and available credit, low interest rates and much more.

People who bought homes they could not afford did it because they saw an opportunity to “invest” their life savings and achieve the American dream. They viewed this opportunity as attainable because banks made it possible, unscrupulous agents/brokers made them believe it was possible, and because they lacked the knowledge necessary to understand the responsibilities, risks and benefits of owning a home.

Other illusions buyers had was their wages. The had the illusion that their wages would go up enough year after year to cover their ever increasing debt due to a lavish life style. This illusion, the lack of financial education and self-control allowed for people to live well beyond their means.

Today people, banks, and our government are drowning in debt.

CREDIT

Competition in the market forces business to improve on their products and allows the consumer to purchase those products at affordable prices. However, competition between banks in a booming economy and low interest rates created a credit bonanza.

Instead of banks improving on their products and services, they began utilizing creative financial tools to attract more borrowers. They also lend money to risky borrowers with little regard of their qualifications. Anybody that had a pulse could literally get a loan.

Banks can’t accommodate the demand for credit only with their money reserves. So if they want to lend more money, they sell these mortgages to commercial banks and Wall Street lenders.

Financial Crisis: Who’s Fault Is It, Anyway?

Doesn’t matter.

Because just about everyone is to blame.

Republicans opened the door through debt-based credit derivatives and deregulation. Democrats further contributed by turning a blind eye to Fannie and Freddie and insisting that even those who couldn’t really afford mortgages be allowed to get them. The Bush Administration touted consumer spending as a means to boost the economy, and encouraged reckless consumer behaviors with billions in “stimulus”money, all while fueling the national debt through a disastrous war and tax cuts for people who don’t really need them.

And, of course, greedy banks and mortgage lenders went along, doing their best to bilk whoever came through door for whatever they could get — before passing the risk on to equally greedy investment banks and hedge fund managers. Consumers came along for the ride, abandoning reasonable financial practices and using credit to fuel materialism — as well as making poor decisions by buying homes they couldn’t afford with “creative” mortgage financing.

Nearly everyone shares some of the blame. This is not the time to bicker over who is most at fault. It doesn’t matter. The past is past. It’s time to move forward and fix the problem. REALLY fix the problem. With practical solutions (that’s right, follow the link for just one alternative — and better IMO — solution) that don’t involve throwing a large, arbitrary amount of money at the problem.

This is something that requires measured thought. And a change in how our society now views debt, money and the economy. There’s no reason to rush into a bailout plan right now. Instead, a little more analysis is needed.

12 Comments
  1. Reply
    Rev-'em-up Wright
    April 29, 2011 at 11:39 pm

    This is the real answer simply put:

    Inserting socialist programs into a capitalist system.

  2. Reply
    RomeyM
    April 29, 2011 at 11:41 pm

    I believe you forgot to give credit where credit is due to the Democrats you have sitting in congress, they have a great deal to do with the financial crisis as well.

  3. Reply
    Bert R
    April 30, 2011 at 12:37 am

    the CRA, inflation, and a fiat money system

    while people took credit they couldn’t afford (poor behavior no doubt), the credit was artificial and would not have existed if it wasn’t created by the Fed.

  4. Reply
    Thomasina Paine
    April 30, 2011 at 12:58 am

    The globalists who are destroying western civilization.

  5. Reply
    black leopard
    April 30, 2011 at 1:39 am

    financial institutions

    speculators

    special interest groups with political influence

    politicians with ties to influential special interest group

    we are part of the problem, we are addicted to credit cards

  6. Reply
    iamct01
    April 30, 2011 at 1:42 am

    It started with Reagan lifting tariffs that use to protect our industrial might. Clinton signing the Republican NAFTA agreement did not help. But the real mistake was listening to GreenSpan. He had this great idea to give everybody credit even if they cannot afford it which is good for interest business but now the outsourcing is catching up to us and we don`t have the wages to pay off anything so we stop buying.

  7. Reply
    Cup-o-STFU
    April 30, 2011 at 1:47 am

    Pelosi has targeted you for death….

    You have figured it out, she has sent a squad after you. You are hereby sentenced to death by styfling suffocation under barney franks enormous A$ $ .

  8. Reply
    tribeca_belle
    April 30, 2011 at 2:16 am

    Right, blame everyone. One thing is clear — we have been lacking decent, responsible leadership for years and we are about to get a much better president in January. I hope Obama and Congress will be able to address the mess that has been made by the previous administration because we need to have various problems addressed sooner rather than later.

  9. Reply
    Bruce L
    April 30, 2011 at 2:21 am

    It’s very complex and many mistakes have been made by government as well as the mortgage industry but the one factor that stands out above all is the desire of people to “keep up with the Jones”. Without this factor none of this would have happened but how can you expect people to live within their means when you dangle enticing offers and gee whiz electronics in front of them and give them lines of credit that they should never really have had? It’s like the story of the Garden of Eden, Eve and the forbidden fruit that Satan made so enticing.

    Here is an extremely good article that puts a good handle on what has happened over the years. It’s pretty long, but a definite must read.

  10. Reply
    Lana Lang
    April 30, 2011 at 2:38 am

    Barney Frank for pushing Freddie Mac and Fannie Mae to hand out subprime loans. Chris Dodd, Obama, and others for taking tens of millions (Obama placed second at 90 Million dollars) of dollars from Freddie. The dems milked Fannie and Freddie. They also ran congress.

    When people couldn’t pay off their loans, the money dried up. Banks didn’t want to lend other banks money. Without the flow of money between banks, our economy ground almost to a halt.

    Then you have Obama, who flippantly says he will tax the bejesus out of us. So investors are withdrawing from the stockmarket in hordes, shocking the economy.

    Obama is very involved with screwing up our economy already. He’s not even the president yet.

  11. Reply
    Brokeback Brady
    April 30, 2011 at 3:28 am

    The greedy american who bit off more then they can chew!

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