For starters, see Time’s 25 People to Blame for the Financial Crisis.
Be cautious when hearing moral assertions that homeowners with faulty credit brought us down.
The overall percentage of problem loans is small — delinquencies rose from 1.45% to 1.55% of 40 million mortgages through January: just 18% of these carried by credit scores under 688, but 7% and rising of FICO ratings above 752.
These are not the percentages that have crushed the global economy.
“We witnessed the collapse of the financial system,” says George Soros. “It was placed on life support, and it’s still on life support. There’s no sign that we are anywhere near a bottom.”
The Crisis & What to Do About It
… Bubbles always involve the expansion and contraction of credit and they tend to have catastrophic consequences. Since financial markets are prone to produce bubbles and bubbles cause trouble, financial markets have become regulated by the financial authorities.
… It is important to recognize that regulators base their decisions on a distorted view of reality just as much as market participants—perhaps even more so because regulators are not only human but also bureaucratic and subject to political influences.
… In contrast to bubbles, which occur only infrequently, the cat-and-mouse game between regulators and markets goes on continuously. [and is] ultimately responsible for the severity of the current crisis.
So much to understand.
Michael Hudson, who holds a strong view on who got us into this mess, is also gaining traction on this:
Calling the $12 trillion giveaway to bankers a “subprime crisis” makes it appear that bleeding-heart liberals got Fannie Mae and Freddie Mac into trouble by insisting that these public-private institutions make irresponsible loans to the poor. The party line is, “Blame the victim.” But we know this is false.
One would think that politicians would be willing to do the math and realize that debts that can’t be paid, won’t be. But the debts are being kept on the books, continuing to extract interest to pay the creditors that have made the bad loans. The resulting debt deflation threatens to keep the economy in depression until a radical shift in policy occurs – a shift to save the “real” economy, not just the financial sector and the wealthiest 10 per cent of American families.
… despite what Milton Friedman said, the economy today is increasingly about how to get a free lunch – how to get the government to avoid taxing it, and shift the tax onto labor and industry instead.
(Incidentally, as one reviewer has said, “Anyone who senses that behind the comforting rhetoric of Free World and Democracy, an aggressive empire lurks with contours and mechanisms unlike previous ones”, should check out Michael Anderson. Although I’m utterly fed up with Socialism vs. Capitalism and a’ that, most major and common economic explanations are rubbish too.)
The CEO of USBancorp, critical of Paulson’s TARP and worried about new D.C. regulation, is also asking us to remain encouraged: “Perhaps what we should do is check ourselves and say, ‘OK, it is tough. What can we — any two of us, any five of us, any 200 of us — do to improve the outcome of this difficult circumstance?'”