Back in 2009, I published a list of causal factors of the financial crisis: Who is to Blame, 1-25. It was culled from Chapter 19 of Bailout Nation.

For this morning’s exercise lets see where the FCIC and BN differ in emphasis and causal factor.

1. Federal Reserve Chairman Alan Greenspan: We each agree that Greenspan was the single biggest factor in allowing the crisis to develop. Nonfeasance is what I called his refusal to perform his duties as a bank regulator. The FCIC reached the same conclusion.

2. The Federal Reserve (in its role of setting monetary policy) Our biggest disagreement.  As discussed repeatedly in Bailout Nation as well as in these pages, Ultra-Low Rates are what jump started the housing appreciation cycle, sent bond managers into the arms of RMBS underwriters, and had other pernicious effects on risk management.

There is simply too much data proving that these interest rates were the push that got the ball rolling. The FCIC said they “created increased risks.” What they may be saying is that despite low rates, had these other factors not occurred, the crisis would not have happened (we wont know until the report is out).

3. Senator Phil Gramm: It does not appear that the Commission named anyone in Congress as a causation. They do seem to have named several of Gramm’s pet deregulatory projects — namely, the Commodities Futures Modernization Act (CFMA).  (I’ve heard rumors of Glass Steagall repeal getting some ink as well). I do not think you can separate the legislation from its proponents — especially with someone like Grammm, with his long history of magical beliefs in the markets.

4-6. Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings (rating agencies):  They called them “cogs in the wheel of financial destruction;” I prefer the Stiglitz quote I used: “They were the prime enables of the credit crisis.”

7. The Securities and Exchange Commission (SEC) The infamous 204 change in leverage rules –the “Bear Stearns exemption:” — gets the appropriate  blame.

8-9. Mortgage originators and lending banks:  Specific errors in risk management and underwriting got blamed, but we shall have to wait until the full release to see if the Lend-to-Sell-to-Securitizers model comes in for criticism.

10. Congress: We obviously disagree here, but its not surprising that Congress and its members seem to be given a pass by the committee filled with congress people.

11. The Federal Reserve again (in its role as bank regulator) Lets assume they extend the blame of Breenspan and Bernanke to the full FOMC. here.

12. Borrowers and home buyers: The borrowers played a major role here, and I have yet to see any criticism of the reckless of the American in their free money grab from the FCIC.

13-17.  The five biggest Wall Street firms (Bear Stearns, Lehman Brothers, Merrill Lynch,Morgan Stanley, and Goldman Sachs) and their CEOs: They seem to catch flak for their recklessness and irresponsibility. Exactly how much will be revealed in the full report.

18. President George W. Bush: Lots of blame for W’s administration, primarily for rescuing Bear but not Lehman.

19. President Bill Clinton: For the Commodities Futures Modernization Act, but unknown about Glass Steagall repeal.

20. President Ronald Reagan: Nothing said whatsoever about the man who started the entire deregulatory movement. I suspect that Reagan would not have recognized how a legitimate attempt to reduce red tape and help small business became a Frankenstein creature

21-22. Treasury Secretary Henry Paulson: Guilty.

23-24. Treasury Secretaries Robert Rubin and Lawrence Summers: No mention of Rubin, but his protege Summers comes in for a tongue lashing.

25. FOMC Chief Ben Bernanke: Guilty

26. Mortgage brokers: No mention Guilty!

27. Appraisers (the dishonest ones): No mention

28.  Collateralized debt obligation (CDO) managers (who produced the junk):  No mention

29. Institutional investors (pensions, insurance firms, banks, etc.) for buying the junk: No mention

30-31. Office of the Comptroller of the Currency (OCC); Office of Thrift Supervision (OTS): Both found guilty of pre-empting state regulators from preventing abusive lending.

32. State regulatory agencies:  see above

33. Structured investment vehicles (SIVs)/hedge funds for buying the junk: No mention


So all told, the commission seemed to focus more on the head line players — Fed chiefs, SEC, OCC, OTS regulators, governmental bodies, and the big wall street banks and rating agencies.

The devil is in the details, and we shall have to wait until tomorrow to see what lies within the covers of the full FCIC report.

Category: Bailout Nation, Bailouts, Credit, Really, really bad calls, Regulation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

62 Responses to “Assessing Blame”

  1. Taylor says:

    “20. President Ronald Reagan: Nothing said whatsoever about the man who started the entire deregulatory movement. I suspect that Reagan would not have recognized how a legitimate attempt to reduce red tape and help small business became a Frankenstein creature”

    Deregulation started under Carter.

    Or you could go back to JFK, when Bobby Kennedy started deregulation of the trucking industry to cut off Hoffa at the knees.

    But it does seem to be under Reagan that a decision was made to outsource manufacturing to Asia and rely on asset bubbles from financial services to maintain living standards.

  2. Petey Wheatstraw says:

    Reagan started trickle-down, voodoo economics, militarism, and massive deficit spending. He weakened the government and strengthened corporations on the baseless and fuckwitted assumption that the private sector was more effective than the government at solving problems and acting for the public benefit, and that they would — if given the opportunity to act without regulation and to control the vast majority of the common wealth of the nation — do what’s best for the country and improve the lifestyles of the middle and lower classes.

    We are living the results of Reagan’s flawed ideology.

  3. Petey Wheatstraw says:

    Edit to above:

    Reagan didn’t invent militarism, but he did preside over the biggest sustained peacetime buildup in U.S. history.

  4. JimRino says:

    Reagan fell for Milton Friedman’s economic fairy tale.
    In reality businesses that aren’t regulated turn corrupt.
    Healthcare: pre-existing conditions and rescission: how did these become legal in the first place?
    When the industry moves from selling insurance to consumer fraud.

    I love how the “right” calls investigating fraud “socialism”.

  5. maddog2020 says:

    Wake me when some one (a) goes to jail or (b) passes real regulatory reform.
    Nothing about Obama’s speech last night made me think any of those things are going to happen any time soon.

  6. Diogenes says:

    #12 Borrowers and Home Buyers – I think this one was not a prime cause. For me, the chain of money negligence begins with the banks. Applying the “but for causation test:” but for the negligence of the banks with their funds would this have happened? No. The banks had a fiduciary duty to lend responsibly; a duty to their shareholders, bondholders, to the FDIC and taxpayers. If they had not shoveled money out the door recklessly to garner fees, certain homeowners would not have been able to party with it.


    BR: That may be true — it is the banks money, and they were the ones who traditionally enforce lending standards — but I refuse to exonerate adults who through their own foolishness or recklessness, agree to mortgages they likely could not afford.

  7. JimRino says:

    With the Koch brother, oil industry, Wall Street rear kissing tea party elected, we won’t see any real reform.

  8. AHodge says:

    I would add
    1) accounting and accountants. all the financial accountants exept at Morgan and GS would have to be retrained, and the risk mgt based on the bad accounting
    2) downside of securitization. the investors can all run away, nice credit supply system. the returns to fraud are say tenfold
    3) and 4) are two of your favs, the Buy Side IBGYBG and fannie and freddie

    5) fake insurance of all kinds
    6) major flaws in corporate governance

    the system is the problem, the criminals are certainly there and should be caught or exposed, but exposure, enforcement and morality wont cut it alone

  9. Expat says:

    Why are the Wall Street banks only coming in at numbers 13 to 17?
    If I understand your logic, rape is the fault of:
    1. Parents for not teaching boys to be nice
    2. Police for not protecting the victims
    3. Judges for not imposing harsh enough punishments
    4. Larry Flynt for getting the boys all hot and ready to a bit of the ol’ in-out, in-out.
    5. Women for being tramps who deserve it.
    6. Rapists for doing what they do best.

    Barry, you are part of the industry (disclosure: so am I) and the fault is not in our stars, but in ourselves. Let’s face it. Wall Street employees are rapacious, greedy, and corrupt. Pointing to the five biggest banks and putting in the middle of the list is indicative of a healthy dose of self-delusion about the business in which you work. Without the paltry and weak rules and regulations we have in place and the less than enthusiastic enforcement of those same, Wall Street would be skinning babies alive to make lampshades for sale on E-Bay (and gaming the bids as well).


    BR: I have to disagree. Much of the rest of the list consists of the mistakes people made giving Wakll Street what it wanted — low rates, deregulation, more leverage, less oversight, etc.

    To quote the NYT, “The author writes with the fury of an insider mortified by the behavior of his heretical peers.” If you think I am too easy on Wall Street, then I am going to guess that you have not read the full book Bailout Nation.

  10. Ted Kavadas says:

    RE: “…Ultra-Low Rates are what jump started the housing appreciation cycle, sent bond managers into the arms of RMBS underwriters, and had other pernicious effects on risk management.”

    While many believe that ultra-low rates caused (or fomented) the housing bubble, I find it interesting that our current prolonged ultra-low interest rate environment largely escapes scrutiny. While many believe this ultra-low interest rate environment is warranted, given economic circumstances, that doesn’t necessarily mean that it won’t (or hasn’t) cause asset bubbles to form.

    I believe there are many asset bubbles currently in existence, and their eventual resolution will prove highly damaging to the economy. I have written many posts on the topic; a list can be found at the link below:

  11. carrottop says:

    i disagree,

    deregulation of the subprime market + allowing big investment houses to lever up to 50x were the main thing.

    whereas central banks stimulated it thru low interest rates is secondary .

    higher interest rates would not have stopped leverage or subprime lending,
    subprime peeps cant afford low or high interest rates.

    congress, senate and executive are to blame .

  12. Clue:

    29. Institutional investors (pensions, insurance firms, banks, etc.) for buying the junk: No mention

    “Somebody” has to Buy this G*rbage..

  13. VennData says:

    Mortgage brokers and Congressfolk are just trying to earn a living. But then so are the Somali pirates.

    Speaking of which, California Representative Darrell Issa is going to “wisely” spend your money investigating the administration’s relationship with Google…

    …and he calls it -wait for it – “Lost in the Cloud” …right up with the GOP’s infamous “Clean Skies Act.”

    Shouldn’t they investigate ALL government relationships with people with money? Including Somali pirates?

  14. dss says:


    Have you read Paulson’s “On the Brink”?

    Amazingly self serving, “he was appalled as anyone” by Wall Street’s compensation but didn’t want to send the wrong message or not be able to attract the best people if they tied compensation to bailout money received.

    This was during the days when the entire financial system was collapsing and he was more worried about attracting the best people than making sure that the executives would not continue to enrich themselves? Where would these people go instead of Wall Street? Main Street? Even the best paid people on Main Street make a fraction of the worst paid on Wall Street.

    No mention of his $500 million take from Goldman or the fact that his capital gains of about $200 million were forgiven when he went to Treasury.

    His book is a fascinating look into the actions behind the scenes in the heat of the collapse and does provide some insights but like Greenspan, this book was written primarily to redeem his reputation. (many references to his religion, God, doing the right thing)

  15. sekdirm says:

    i would also include the people who took out mortgages that were above what they could realistically pay back. i dont discount all the predatory lending and the fault of govt etc, but at some point people need to take responsibility for themselves. to make a list like this and not include the people who greedily trying to make a quick buck is wrong in my opinion. people need to take responsibility for their own actions, they will be better off for it.

    that said, i agree that the envoirnment was set to trap these people.

  16. DeDude says:

    The FCIC report will bring short-term attention some of the causes of the financial crisis. As already seen it will also give those with fact-based opinions the opportunity to once again bang their heads against the wall of ignorance from those with ideology-based opinions. It may give us a chance to again high-light what was NOT done in the first round of financial reform, such that when the next collapse comes people will have a better chance of understanding why it happened.

    The democrats could make political hay on this if they now came out with a strong financial reform proposal and let the house republicans block it. But with Obama’s economic team being appointed by Wall Street it is unlikely that they would even go for that. Most likely everybody will just let this report collect dust until it has been completely forgotten. So it will “do a little good” or do “little good” depending on whether you are a “glass half full” or a “glass half empty” kind of guy.

  17. carleric says:

    I thought your book (Bailout Nation) pretty much covered the problems and laid the blame if a bit too kind and forgiving. We were/are all a part of this mess. All politicians are born sucking on the public teat and catering to monied intersts. Are there any competent, honest, dedicated and competent public officials? See if you can find one.

  18. DeDude says:

    Was the bank or the consumer to blame for home loans to consumers that could not afford them (unless house prices continued with 20%+ per year increases, and the fed continued its 1% rate)?

    Sort of like a slumber party of teens where a few adults bring a case of orange juice and vodka. Should these teens have known that this funny stuff that got added to the juice was not just making them feel good, but could poison them and course serious problems later in the night.

    Yes people should be held responsible for their own acts but only to the extent that they actually knew what they were getting into. In a society where 1/3 cannot balance a checkbook it may not be surprising if a lot of people were not able to spot the con-game of those telling them that they could afford those huge houses and that the enabling loans were just fine (and could be refinanced in a few years). There were certainly some home-loaners who had sufficient knowledge to “have known better” but also a lot that didn’t. The banks on the other hand ALL should have known better, they were the adults/professionals in that relationship.

  19. RC says:

    The Commodities Futures Modernization Act (CFMA) appears very high in the blame and deservingly so. What is surprising is that very little has been done since to fix the speculation in Commodities.
    Still OIL markets are plagued by speculators holding paper barrels, spiking the price of OIL in spite of ample supplies and very high reserves.

    OIL price speculation causes inflation and results in life and death situations in emerging and poorer countries.

    For god sake why not raise the capital requirements like Marvin Schwarz was saying on CNBC yesterday?? Why not? For us its just a minor inconvenience and numbers game, for large part of the world its life and death.

  20. cognos says:

    FCIC is crushing you on this.

    Easy way to understand. What matters more — a “low” 4% interest rate? Or the difference between 5% down and 20% down?

    DOWNPAYMENT is EVERYTHING. If bank regulators would’ve simply asked for 20% downpayment in all cases… there could be no subprime crisis (also no serious price run-up).

    In fact, its likely that then interest rates would’ve needed to be much lower. As we have really had lower and lower inflation over every 5-year period since 1980. We now have the lowest inflation readings in modern history (and its a worldwide phenomenon — Germany, Japan, etc).

  21. Mannwich says:

    You’ll be writing up another one of these (likely with some of the very same usual suspects listed) when this next bubble crashes. But in the meantime, enjoy. We could be waiting a while.

  22. Expat says:

    Hi Barry, I have read Bailout Nation, but I did not walk away with the impression that you believe the system (and, more importantly, the people who comprise it) is faulty at heart. Most people I know in finance and banking claim they are different from those few rotten apples who pervert capitalism. Most of them are lying to me or themselves. Granted, I mainly know traders, but those are the guys who make the wheels go around anyway.

    Being amorphously “hard on Wall Street” without discussing the basic, fundamental, and underlying psychopathy that drives today’s markets is not intellectually honest. Even in your response to me, you say the rest of the list consists of people who gave Wall Street what it wanted. So, in reality, the principal culprit is Wall Street itself. Not the five biggest firms or a few bad apples, but the entire rotten system composed mainly of greedy (yeah, yeah, greed is good..blah, blah, blah) and morally bankrupt people.

    Let me put it this way. How many Wall Street employees do you know who you would be happy to have for a son-in-law?


    BR: Lots. You read them in this suite every day.

    Do not fall prey to over generalization; the crisis was caused by a few 100 people; a few 1000 at most. There are millions of people on wall street, in the banking industry, in real estate, ertc. who go to work, put ina full days labor, play by the rules, don’t screw anyone over, and have good Karma. Your blithe dismissal of them is incorrect.

  23. franklin411 says:

    There’s a measure of myopia in this report. I agree with a lot of the blame that has been assessed on the wizards of finance and their partners in government who allowed them to build a house of cards. A VERY profitable house of cards–for them.

    But why was the crisis so pronounced?

    Because the GOP beginning in the 1980s were joined by the Democrats in the 1990s on a policy agenda based on a failed, laissez faire ideology that eviscerated America’s manufacturing base, its infrastructure, and its R+D complex over the course of 30 years.

    Why was a credit bubble necessary? Because the average guy couldn’t get a decent job paying a fair wage after 1981, but he could get a credit card that would make him feel as if he was prosperous. Then, in the 1990s, he could get a job cleaning toilets at Goldman Sachs and feel as if he was a participant in the “new economy.” And then in the 2000s, he could get a house that might double in price in two years and feel as if he was a player.

    Just look at the world–It’s no accident that the manufacturing countries were immune from the financial crisis.

  24. cognos says:

    My list:

    1. BANK REGULATORS — for not protecting consumers, enforcing some minimum underwriting standards and asking for 20% downpayments into an OBVIOUS price bubble. They deserve most of the blame.

    2. MAJOR BANKS — for not working with bank regulators, before, during and after the crisis on the same issues. Why did major banks not come up with proposals for better collective solutions that individuals foreclosures? What a bunch of losers (BUT… while the banks are 50% responsible, they have taken most of the $ pain and public guilt).

    3. Hank Paulson — worst person ever. Everyone knows it. Even him.

    4. Sheila Bair — arguably more of an idiot and more responsible than Paulson… yet sits comfortably with no blame. How is that possible? She is bank regulator #1? WTF!?!

  25. Mannwich says:

    If so many “important” people and entities are at fault, then nobody is, which means nobody of an import will be held responsible in any meaningful way. We still haven’t learned our lesson, which means the next one will be even more vicious than the last two.

  26. Mannwich says:

    Good points, franklin.

  27. Arequipa01 says:

    Whenever I am confronted by the astounding absurdity of current events, I like to turn to Slavoj Zizek and reflect on his thoughts:

    “due to the growing role of rent at the expense of profit, market economy will have to be more and more sustained by strong State measures which I claim will demand some form of authoritarian state…”
    (at about the 1:15:55 mark)

    From a lecture given in Sept 2009:

    Kelo v. New London

  28. budhak0n says:

    By the time , most of these reports are written, the information contained within them is of very little use.

    Does it really matter at this point? What matters is what happens tomorrow, not what happened yesterday.

    I think if you give people a way to get their hands on cheap money, they are going to take it. We can’t very well advocate capitalism while in the same breath decry it’s practice.

    I realize there’s a group of people way upside down on some monkey business they originated. So what? That’s their problem. It really has very little effect on what we do from this point forward.

  29. budhak0n says:

    What is there for people to be “held” responsible MW? Just another in a long line of American Scandals.

    I want to hold that title insurer “responsible” who tried to doink me 8 months after a closing in 1999. Like most people, including the title company, we come to the inevitable conclusion that although legal means may be available whereby one may attempt to affix blame or inflict punishment on another party, in the long run, it’s just not worth the time and effort.

    Much better to save your energy for whatever is coming next down the chute.

  30. Mannwich says:

    @budhak0n: Excuse me but when a crime is committed, I may be old-fashioned, but I believe being “held responsible” is called charging that person with said crime and prosecuting them to the fullest of the law. But I’m just a little person and those little quant things called “laws” still apply to me.

  31. Mannwich says:

    And if we don’t truly learn from today (or yesterday), can we ever really prevent the same stuff from happening over and over and over again but in bigger fashion each time? I guess it’s just inevitable.

  32. budhak0n says:

    There was a crime committed. Pray Tell. We did away with the concept of Debtor’s prison many many moons ago.

    The only “crime” is in that a guy like me who pays their creditors has to live amongst a group of deadbeats constantly running around whining whilst they pork their own.

    Not exactly a felony.

  33. Mannwich says:

    Really? Is that right? So it was only about “deadbeat borrowers” and nothing more? Good grief. Not sure why I even bother.

  34. DeDude says:

    Houses are purchased based on whether the person purchasing the house can afford the monthly payments. Real estate agents are compensated with a % of the sales price and have a strong incentive to get people into the biggest house they can afford (the monthly payment on).

    Monthly payments are determined by interest rates (Fed and market forces) and loan structures (regulation and market forces). The one-two punch that knocked house prices into bubble land was based on “defects” in both interest rates and loan structures. The interest rate defects came from both the Fed and the invisible hand failing to do what they were supposed to do. Same with loan structures where both regulation and the invisible hand failed to kill dangerous loan structures. All of this can off course be further sub-divided into long lists of sub-sub-sub failures.

    But the big picture it is pretty simple; the invisible hand gave everybody the middle finger (deep hard and without Vaseline), and now some right wing perverts are demanding that we leave more power to the invisible hand.

  35. budhak0n says:

    Yes Mannwich. That’s all it’s about. The loans were originated attached to real estate from Actual borrowers.

    The only thing of any interest to anyone should be situations whereby loans were originated for false real estate “projects” with non existent borrowers.

    All this stuff about how it’s unfair for this borrower to have received this or for that bank to have done that is just a cyclical bunch of nonsense that leads to nowhere of any use.

    The Banks are at fault for having lent money to people who weren’t going to pay it back. I really feel the banks have very little fault in any of this whatsoever. But I’m aware that given the general vitriol stirred up, I’m in the minority on this point.

  36. Mannwich says:

    Good to know. I’ll know now not to bother engaging you on anything from here on out.

  37. budhak0n says:

    Think of it this way MW. If you didn’t overextend and leverage yourself, then did you suffer a significant loss when the bottom fell out of the market?

    So if you went around “prospecting” and lost a 3rd of your equity, who really cares. We told you not to do that years ago and it’s not like America is flowing over with empathy.

    My favorites are the crazies who want everybody else to pay for their own idiocy. I didn’t sign those loan documents. It was the system that forced me to behave like a moron. I’m never responsible for my own decisions. It’s always some evil empire force from afar.

    Hilarious stuff if you think about it.

  38. Expat says:

    Barry, “a few thousand”? I have worked on Wall Street, in the City, in Paris, Geneva, and Singapore. If you want, I can go through all my business cards and make up a naughty and nice list. And I could make up a would-be-naughty-if-not-afraid-of-being-raped-in-prison list. And I could come up with several hundred people just in my esoteric realm.

    Sure, I am not pointing fingers at secretaries and mailroom clerks, though secretaries knew what was going on and how Wall Street works. There is always the Nuremberg defense, if you like.

    I am not sure what planet you trade on, but you’re either one in a million or on acid. Based on your blog and your book, I’ll go with one in a million. So that leaves 999,999 criminals in suits wreaking havoc on the world.


    BR: My experience is very different than yours.

    But stick with the combination of personal anecdotes and over-generalization. I sure they are working for you!

  39. Expat says:

    p.s. Ok, so I am exaggerating, but you seem to believe it’s “just a few bad apples”. I say it’s systemic in the people and the institutions.

  40. budhak0n says:

    That’s capitalism.

  41. obsvr-1 says:

    Problem #1 systematic corruption —- this pervades all of the agencies and people above.

    There is the talk of deregulation, however the financial sector is the most regulated of industries. But, when the ‘cops’ look the other way or are paid (lobbies) to allow unethical and fraudulent behavior the resultant wet blanket of security is worse then no regulation at all.

    The other major theme, the FED, low interest rate policy and boom/bust/bailout monetary intervention from the central planners, the failures of the FED chairmen (Greenspan, Bernanke) and the other chairman that colluded with the banking cartel to transfer wealth from the American people to the Money Elite using the hidden tax of inflation.

    We are being dealt a death by a thousand cuts from the FEDs collusion with the FIRE Cartel, corporatism and a corrupted system by Money influenced politics.

    Rid the country of the blades by:
    * Repeal of the FRA 1913 (End the FED) and all associated legislation.
    * Implement Sound Money (gold standard), End bank counterfeiting through FRB – enable competitive banking
    repeal 17th amendment – Return rights to States re-establish the Democratic Republic (remember the OCC preemption of States rights on bank regulation and underwriter standards)

    * repeal GRAMM-Leach-Bliley — restore glass-steagall
    * repeal CFMA

    Solve the root of the problem, not band-aid all of the tentacles holding the blades. This should be Obama’s Sputnik moment, Apollo Moonshot. But the only corruption he mentioned in his speech was that in Columbia and Tunisia, go figure he would miss the forest for the trees when it comes to the systemic corruption.

  42. mathman says:

    govt. at work sniffing out crime at the highest levels and . . .basically forgetting about it:

  43. Rescission says:

    If the firms who securitized the loans and sold the bonds had been required to hold onto the equity piece of the deals and had been forced to be on the hook for the residuals, it probably wouldn’t have gotten very far out of hand. No skin in the game allowed securitizers to sell off all risk. Never a good thing. The great thing about capitalism is that when your name is on the dotted line and you are on the hook, you watch what the heck is going on, because it’s your money at stake.

    Having said that, we are delusional to believe that we should trust this central government to be smart enough to regulate our safety other than the basics. The mortgage business was already regulated to high heavens but it didn’t stop what happened. I was there and in the middle of it. Regulations increased significantly from 1990 to 2008 in this space. There was way too much regulation. The problem wasn’t not enough regulation, but there was no “smart regulation”. I can tell you that one regulation would have done more than the thousands of regulations that were added over those years. Every mortgage broker, every mortgage lender, and every securitizer should be forced to be on the hook for loan performance. By forcing this on the Wall Street and other Banks, they would have pushed it back down the line all the way down and things would have stayed in check.

  44. whskyjack says:

    ” If you didn’t overextend and leverage yourself, then did you suffer a significant loss when the bottom fell out of the market?”

    such a limited concept of “you”

  45. whskyjack says:

    What we have is a complex problem.

    What I see a lot of people doing is pulling on loose threads and blaming the thread when it is the weave of the cloth that is the problem.
    It is the system that failed, the people in the system were just doing what all humans do. Just being their regular greedy stupid naive corrupt selves. And since we can’t fix humans and turn them into perfection then maybe we need to try and fix the system where it can function better. Other wise it will happen all over again and next time it we may not recover from it as easy as this time.

  46. rfullem says:

    you all have it wrong..I’m to blame. Bought first home early 2007. 60% down cash from 20-years of SAVING and got one of those wacky 30-year fixed rate mortgages. According to the bama and pretty much everyone else, I am a “speculator” and hence deserve to lose my money. At the end of the day, family finances permanently impaired while the group of innocents listed above are not. capitalism at its finest!

  47. Robert M says:

    As someone who once worked in the “business” it is not simply greed that causes the problem. It is the disconnect between whose money you’re using and your responsibility to it. When you use your and your partners money, can’t access it in its entirety and only over time you do not and are not allowed to take risks that would make it all disappear. As this situation has proven if you use other people’s money w/ the responsibility for it placed in other people’s hands you can destroy the system.

    For @ $25/ you could have just sent the ten guys a copy of Bailout Nation and saved the government money

  48. obsvr-1 says:

    Mish’s view on FCIC, references TBP

    FCIC Investigation Misses the “Big Picture” Cause of the Crisis; Next Financial Crisis Brewing Already

  49. budhak0n says:

    Let’s all break out the violins. Well what about the people who actually own their property vs people who make a monthly payment on their property?

    You don’t see them whining.

  50. budhak0n says:

    You know I’m really ticked off at my local Wawa because they HAD opened up like 4 stores more than the other 6 which are also completely unnecessary, now those other stores are vacant and the land just sits there while the rest of us have to drive by and look at it.

    Oh and did I mention? Nobody cares. All people ever care about is how it effects their own bottom line.

    And there’s nothing wrong with the system. The system’s done this over and over again. It’s just this time it really scared the bejesus out of some people.


  51. obsvr-1 says:

    check out the candid review of TARP by Neil Barofsky IG (SIGTARP)

    or the report if you like the long read

  52. Expat says:

    @Robert M: I agree with that but I would not accept that forcing everyone into partnerships would clean up Wall Street. I frankly don’t think GS was any more moral or honest prior to becoming a public company. Partnerships might limit excessive risk taking, but partnerships can be as corrupt and dishonest as any corporation. I would guess that partnerships could be even worse since they don’t have the same disclosure requirements.

    And, Barry, I won’t go quietly into this good night. All the institutions you blame were created by humans and run by humans. And I also think you are over-interpreting my assessment of human frailty. I don’t believe that 99% of Wall Street would really slaughter babies for profit, but I do believe they would rip the face off clients and counterparties, front run markets, mismark their books, and give themselves outrageous bonuses for doing all that if left to their own devices. From the padded expense claims or the excessive drinking on the broker’s tab , through recommending investments that are not optimal but give you a nice commission, to lying, cheating and stealing like Bernie Madoff. We all do it. And on Wall Street, where there is opportunity, motive, ego, and lack of personal responsibility, it grows and grows until it dominates the business model.

  53. DeDude says:

    “Well what about the people who actually own their property vs people who make a monthly payment on their property?”
    “You don’t see them whining.”

    It seems to me that you have done nothing but whining about how those terrible other ones with loans have gotten such a sweet deal, while you have gotten none.

  54. budhak0n says:

    Couldn’t care less what other people do with their money. The large majority of you are dumber than paint anyway.

  55. louis says:

    “It was the system that forced me to behave like a moron. I’m never responsible for my own decisions.” I think one side in that moronic behavior got a do over?

    “That’s capitalism” Is it when one side can always be rescued?

    The aftermath is that a very few are able to make life shitty for the many.

    100-1000 flawed humans can create vast misery and lost homes for millions, and they can do it at will. The lesson going forward is never believe that anything is an American Value and serves a purpose beyond speculation. Anything you buy has no real value except what illusion you create in your head. It can all be taken from you at any moment. Do not be afraid to give back what the banks gave you with ease. They hope your fear and morals will get in the way. It really is that simple. Walk away, start over and watch out for their next tulip bloom.

  56. budhak0n says:

    Who got a do over? Please elaborate.

    Ok you’re a borrower. This means you don’t have the capital necessary to actually purchase that which you seek to own. YOU set the price. Not the lender, because you come to the lender with the amount of money you wish to “borrow”.

    The lender gives you the money. You default. Who’s getting a do over? Your default should in turn bankrupt the party who lent you the money? Hilarious.

  57. louis says:

    Who got a do over? Please elaborate.

    Are you serious??

    Your default should in turn bankrupt the party who lent you the money?- You almost got it.

  58. rfullem says:

    ” All people ever care about is how it effects their own bottom line.”
    first, put your maturation cycle into overdrive.
    second, when you buy an asset – either cash or finance (stocks, bonds, toilet paper,), legal recourse is attached to its value. In other words, there are lemon laws and you can sue. Recourse is not readily available here and making lame excuses as to why systemic negligence is “good” is “bad.” Yes there is a difference between the two. feel free to ask Bill Gates, Warren Buffet, etc.

  59. Topspin says:

    It’s all relative rationalization. It certainly wasn’t a hundred people that caused this. Come on. It was systematic and the system of catastrophe was participated in on almost every level of the financial industry. What everyone learned from S&L, accounting fraud and junk bonds was just how far the system could be gamed. Things didn’t improve because of failure they got worse, it became the model.

    In the early 2000′s maybe a broker is selling 30yr. Alt-A loans with 10% down at a padded 7.8% to people he knows are not competitive (ignorant and depending on the professionalism of the industry) or not necessarily good for the loan yet there’s a outfit that’s buying them from him week in and week out so he figures the “market knows best”. So that makes it right because some other guy in the “chain” is willing to pass it off another guy in the “chain”? Or maybe it is ok because other brokers are selling 3% down ARMs to people with even less ability to repay. In finance there’s always another guy doing something “more risky” yet that risk turns into a scam that is rationalized by “good people” every day.

    If you think the USA got here without a decrease in overall professional responsibility and an increase in acceptable levels of conscious malfeasance on all levels you are in denial. Add on top of all this rationalization the big boys like the FED, and congress, and Phil Gram etc. etc. etc. are doing the same and icing the chain and the system making the “game” “institutionalized.”

  60. Topspin,

    no kidding~

    and, , certainly, need not apply..

    as an aside, this, the first ‘Search Result’, is, rather poetic..

    BigBiz Internet Services
    Welcome to 12 CDs for the Price of 1! This domain has been parked at BigBiz Internet Services. When you are ready to have … · Cached page – [cache] – Bing, Yahoo!, Ask

  61. [...] bubble/financial crisis/Panic of 2008. From the bits and pieces I’ve seen, mainly taking Barry Ritholtz’s take on it, it’s a very comprehensive and insightful report, and for that we should all be [...]