Who is actually responsible for the economic meltdown?

[randomrogue]

Lately I've been discussing with friends how we got into this mess. I maintain that people just move their money into the next "get rich scheme" over and over again so we saw money move from Tech Stocks into Housing and when things started looking poorly there we saw heavy speculation in commodities such as Metals and Oil.

Personally I look back on all this and blame both parties. I personally think Congress is terrible no matter who is in charge. Those in power tend to succumb to greed. Our best times are when you have split power and nothing gets done. I'm not one to put the burden solely on the President either since Congress is the one that signs the checks and writes the bills.

However anytime I discuss this with a hardcore republican they blame democrats. Talking with a Democrat is a complete waste of time as well. I prefer people in the middle or who can be somewhat open minded and not divert the argument into something like abortion or the Iraq war.

So who did what? Who's fault is it? All I can really see are a few things and most are mixed.

1. Deregulation of the banks. Clinton signed it into law, passed by a Republican congress (55/45 and 223/211), but had a final vote of something like 92 to 5 in the Senate.

2. Barney Franks. Is this guy solely to blame along with the Democratic party for the housing crisis? Why do they blame him for everything?

3. Who's fault is it that we let the banks get bailed out but they didn't loan money to anyone? Who let them get away with making all this money during this economic mess?

4. Who let banks loan money to people with no docs, no money down, and no job?

5. Who wanted every American to own a home regardless of whether they could really afford it? Wasn't it both parties once again?

6. Who allowed all these elaborate financial packages and repackages to be sold and resold despite them being worthless?

I suppose I'm just curious what others think? Personally I think both parties are complete garbage and I have yet to vote in an election where I didn't feel like I was picking the lesser of two evils. To be perfectly fair I have always voted with my pocketbook (Republican) but consider myself Independent since I'm liberal on every non-monetary issue. I don't regret my votes, even after the fact, but I'm not afraid to admit that they're all terrible. It reminds me of that South Park episode with the giant douche and turd sandwich.

 

[Brigandier]

I blame us.

 

[First]

Lots of things, mostly lack of regulation of CDO/CDS leading to risk spreading to nearly every major bank in the world betting on housing continuing to rise despite these MBS' being shit, because they had no long-term incentive to see they weren't toxic with no structure in place to reward non-short-term gains.

Also interesting to note Americans still rightly blame Bush and by extension Republicans for the current economy a good 2+ years later, and that's according to the most Republican-leaning polling firm out there:

http://www.rasmussenreports.com/pub..._for_current_economic_problems_39_blame_obama

 

[randomrogue]

Someone told me that there was a poll done years ago where Californians, by a vast majority, believed that housing prices would continue to rise by 20% for the next 10 years. With a $500,000 median price that meant they believed that houses would be worth over $3,000,000 in 10 years. I can't find that anywhere but I do recall something like this being the popular opinion back when housing was booming. Not the $3M but the 20% going on for years to come.

 

[Brigandier]

Someone told me that there was a poll done years ago where Californians, by a vast majority, believed that housing prices would continue to rise by 20% for the next 10 years. With a $500,000 median price that meant they believed that houses would be worth over $3,000,000 in 10 years. I can't find that anywhere but I do recall something like this being the popular opinion back when housing was booming. Not the $3M but the 20% going on for years to come.

If you don't want to live in California, you're dumb.

 

[randomrogue]

If you don't want to live in California, you're dumb.

Why?

 

[WhipperSnapper]

Both political parties are responsible and so is the American public for continuing to vote for these fools.

 

[Brigandier]

Why?

Good weather, industry, resources and Hollywood. You're only living a half-life if you live anywhere else, California is a happenin' place.

 

[randomrogue]

Good weather, industry, resources and Hollywood. You're only living a half-life if you live anywhere else, California is a happenin' place.

Wait, Hollywood is a reason to live in CA? Are you trolling? Anyways, I've lived in CA, from North to South, and a couple other states and countries. CA is definitely my favorite but saying your dumb to not live here is also dumb. I'm actually gonna leave the state here shortly - although I doubt it will be permanent. Without a strong economy a lot of the draw is gone. Honestly with the cost of living so high and the economy so weak there really isn't much left here other than the weather and friends, at least until things get better. CA ranks towards the bottom in many things relating to public education, has an immigration problem, small businesses are leaving and are not worth starting up, has high taxes, etc. If your standard of living is all related to the weather then CA is amazing, but I think most people recognize that there's more to life than getting a tan year round. Beyond the weather you can have a much higher standard of living in many places outside the state. It might be worth noting that when it comes to standard of living US cities don't even rank in the top 5 for the continent. I'm pretty sure San Francisco is the only city worth mentioning but that's of course assuming you can afford to live there.

 

[Brigandier]

Wait, Hollywood is a reason to live in CA? Are you trolling? Anyways, I've lived in CA, from North to South, and a couple other states and countries. CA is definitely my favorite but saying your dumb to not live here is also dumb. I'm actually gonna leave the state here shortly - although I doubt it will be permanent. Without a strong economy a lot of the draw is gone. Honestly with the cost of living so high and the economy so weak there really isn't much left here other than the weather and friends, at least until things get better. CA ranks towards the bottom in many things relating to public education, has an immigration problem, small businesses are leaving and are not worth starting up, has high taxes, etc. If your standard of living is all related to the weather then CA is amazing, but I think most people recognize that there's more to life than getting a tan year round. Beyond the weather you can have a much higher standard of living in many places outside the state. It might be worth noting that when it comes to standard of living US cities don't even rank in the top 5 for the continent. I'm pretty sure San Francisco is the only city worth mentioning but that's of course assuming you can afford to live there.

I assume you can read my location. I am simply arguing for California so that those that are prone to argue for it, don't have to.

Edit: Thanks for your insight, I like reading opinions on different places to live. SF is one of the places I need to make a pilgrimage. Only so I can worship Neon Deion Sanders, but its still a reason to go.

 

[dmcowen674]

Who is actually responsible for the economic meltdown?

Bush but Obama gets blamed

 

[Murloc]

it's everyone's fault. It's not the fault of any party. It's the mentality and economic principles you believe in that does this.
It's the disadvantage of the extremely liberal capitalism.

 

[boomerang]

I agree with you pretty much across the board. We have a two party system and rarely is one party solely in control. Blame must be spread across the entire system when looking at the situation we're in as a whole. BTW, until we throw every one of them out of office, nothing will change. Anyone who thinks this can be done through the election process is mistaken. Infer from that what you will. Politicians, over time have rigged the system so that the only folks that can afford to run are those that are well-heeled and connected. Who do these people look out for? Each other and their friends. The average Joe gets what's left. Too many of the progressive left want to attack the rich. That doesn't solve the problem. The problem lies in our electoral system and how it has been bastardized over the years. Snap the top off a dandelion and it grows back. You have to take it out at the root to get rid of it. Too many on the left, in their wide-eyed innocence, still think there is a difference between rich Democrats and rich Republicans.

Regarding your questions, I will answer those for which I have both answers and opinions.

1. Deregulation of the banks. Clinton signed it into law, passed by a Republican congress (55/45 and 223/211), but had a final vote of something like 92 to 5 in the Senate. This is more of a statement on your part than a question but I will share my thoughts. This was the start of the downfall. Regulations were put in place after the great depression to keep another one from happening. They're removed and voilà - another great depression. History will show this one to be greater. We have more social safety nets in place masking the severity of this one. We also don't report the indicators honestly anymore. Reporting them honestly paints politicians in a bad light so they made some changes in how they're calculated. AFAIK, the banks have not yet been re-regulated. Why is this?

2. Barney Franks. Is this guy solely to blame along with the Democratic party for the housing crisis? Why do they blame him for everything? Chris Dodd is in it up to his eyeballs with Frank. I hold these two totally responsible for the housing crisis. Progressive insanity brought about this crisis. In a different country they would both be brought up on charges, convicted and probably hung. This might throw a little fear into the rest of the Congress critters but it would be short lived. Oh, why do they blame him? Because he's the mastermind along with Dodd.

3. Who's fault is it that we let the banks get bailed out but they didn't loan money to anyone? Who let them get away with making all this money during this economic mess? Whose fault? Our Government. Both parties. There is no single individual although I'm sure some of our progressive friends here have a sole Republican they can blame - for this and everything else too.

4. Who let banks loan money to people with no docs, no money down, and no job? Frank and Dodd started the process. Our government is to blame. Deregulation more or less let the banks do whatever they wished.

5. Who wanted every American to own a home regardless of whether they could really afford it? Wasn't it both parties once again? Every bleeding heart liberal that makes decisions based on "feelings" instead of logic. Frank and Dodd made it happen.

6. Who allowed all these elaborate financial packages and repackages to be sold and resold despite them being worthless? Banks and the financial industry as a whole were deregulated. Who allowed it to happen? Our Government - that's us.

That's all I've got. The usual suspects, instead of providing additional constructive thoughts and opinions will soon tear apart what I've said by singling out individual words I've used. It's how it's done here.

The people of this nation still have the ultimate control over what happens. The power still resides with us. But don't get too complacent because that power has been and is being eroded. A group has emerged with taking back control of the government as their goal. They are being minimized and marginalized viciously by the progressive left and the media. I wouldn't say we're at the crossroads but we're damn close. Washington DC needs a thorough housecleaning. It can't be done through the election process. The bad apples remaining will spoil the new. We need all new apples.

 

[shortylickens]

Americans.

The banks and politicians and businessmen only gave us what we asked for: Big houses, big cars, lots of toys, high-speed internet, and a trillion gallons of gas.
They profit from trying to keep us happy. And the funny thing is, in America, they ARE us. Its not like theres a special ruling class. We dont have aristocracy. You wanna be successful? Work hard and learn about how the world works. You can be pretty much whatever you want. In fact most of our billionaires and pretty much all of our millionaires started off with relatively humble lives.

 

[IceBergSLiM]

The banksters have been pulling the puppet strings since long before this crisis.

 

[CPA]

Good weather, industry, resources and Hollywood. You're only living a half-life if you live anywhere else, California is a happenin' place.

Hollywood is a reason NOT to live in California.

And OP, watch or read Too Big To Fail for the answer to most of your questions.

 

[Darwin333]

So who did what? Who's fault is it? All I can really see are a few things and most are mixed.

1. Deregulation of the banks. Clinton signed it into law, passed by a Republican congress (55/45 and 223/211), but had a final vote of something like 92 to 5 in the Senate.

This is the single biggest political cause of us actually getting into the mess. Without the repeal of Glass-Stegal most of this shit wouldn't have been possible.

2. Barney Franks. Is this guy solely to blame along with the Democratic party for the housing crisis? Why do they blame him for everything?

3. Who's fault is it that we let the banks get bailed out but they didn't loan money to anyone? Who let them get away with making all this money during this economic mess?

Hank Paulson who imo should be shot as a traitor, blackmailed congress into giving them the money and then he along with Turbo Timmy and the Fed allowed them to not fix the underlying problems and instead do things such as purchase their competition for pennies on the dollar. Congress and both admins deserve an equal share of the blame for not only allowing them to play accounting games instead of fixing the problems but also allowing them to get away with their criminal behavior and keep their ill-gotten gains. Criminal banksters should have, and still can/should, stand trial for blatant violation of existing black letter law.

4. Who let banks loan money to people with no docs, no money down, and no job?

Not nearly as important as "Who let the banks take those loans and sell them as AAA rated investments." They can make all the bad loans they want to imo but misrepresenting that loan to people you are selling it to is fraud.

5. Who wanted every American to own a home regardless of whether they could really afford it? Wasn't it both parties once again?

Neither party really cared about everyone owning a home but they did enjoy the (false) prosperity. To answer your question, the banksters did so they could take your money and then get you (via the .gov) to backstop and cover their bad bets. This was a well orchestrated plan that worked flawlessly.

6. Who allowed all these elaborate financial packages and repackages to be sold and resold despite them being worthless?

The Fed and the US government and they did it knowingly. The long answer is much more complicated but that is the very short version.

I suppose I'm just curious what others think? Personally I think both parties are complete garbage and I have yet to vote in an election where I didn't feel like I was picking the lesser of two evils. To be perfectly fair I have always voted with my pocketbook (Republican) but consider myself Independent since I'm liberal on every non-monetary issue. I don't regret my votes, even after the fact, but I'm not afraid to admit that they're all terrible. It reminds me of that South Park episode with the giant douche and turd sandwich.

I strongly agree with most of the above except I don't vote for evil, period. Fuck that, I would rather write in Beelzebub if I am going to do that. If we are going to vote for evil then why beat around the bush?

 

[Jaskalas]

How did we get here?

The roaring 90s. We built up an empire of fake wealth, wealth that did not factually exist. It only did so on the upside of prices, a bump in the road is all it took to shatter that money.

That happened with the tech bubble. Then the Feds, in all their wisdom, decided to stimulate the missing value. They kept the gravy train rolling long past its sell-by date. We should have had more pain then, to avoid it all coming back to hit us harder in 2008.

Though we're feeling hurt right now, the Feds are doing the exact same thing. They want the fake prices to continue in their effort to buy-out the difference. Higher the prices, the less they have to purchase. It is not working, but they keep pouring in more, and more, and more.

This time they're banking our currency on it. No one can bail that out when their scheme comes crashing down. No sir, you should not be asking why we got here... you should be asking why we're still intentionally making it worse, and how we're about to arrive at a very ugly place that'll make the housing bubble look like peanuts.

In 5-10 years time, you'll be asking the same question to an exponentially worse problem. I just gave you the answer for all three bubbles, because there is very little difference.

 

[Genx87]

There isnt a single donkey we can pin the tail on. It was a series of bad decisions and lots of people taking advantage of those decisions. The people who took advantage were bankers, politcians, and even regular Americans who bought more house than they could afford.

 

[piasabird]

I blame it on the left and right coasts and large cities like Chicago where there is no urban planning and people keep building large houses and the rich people are allowed to buy up all the land, pushing the poor and the average man further out of the cities. In Urban planning there needs to be more apartments so people can afford to live. Yes it may be some kind of an Ideal to live in a house and have a yard for your children to play in, but people need a place to live. Freedom is fine, but who really wants a $400,000.00 house?

 

[Schadenfroh]

Depends on who you ask:
Liberals: Bush, deregulation, conservatives, Zionist bankers and Bush
Conservatives: Entitlement programs / mentality, Clinton bubbles, liberals, over regulation and illegal immigrants

Reality: It was you and me

 

[Linflas]

They should have never allowed investment banking to be co-mingled with commercial banking.

 

[Thump553]

Banking and wall street deregulation, followed by a growing world desire for (apparently) safe (presumably) US gov't backed securities led to the concept of mortgage backed securities. These security packages were constructed with highly complex mathematical formulas that supposedly guaranteed no loss to the security holder regardless of the quality of the underlying mortgages. As demand for those securities skyrocketed (along with the fees to the packagers) this created a huge demand for new mortgages regardless of quality.

Loan originators essentially threw out normal underwriting standards and just about gave a mortgage to anyone for any property. There was enormous pressure (and economic benefit) to loan officers to do so, real estate appraisers pretty much had to go along and issue rosy appraisals or get cut off from the feeding trough.

It all came to a screeching halt in early 2008 when a slowdown in the economy and housing market caused the mortgage backed bonds to become illiquid and drastically decline in value. That caused illiquidity and panic in the entire financial system, closing of several big players and the deep recession that continues to plague us today.

I don't think it is fair or productive to point fingers at any particular political party or program (like affordable housing). The fact of the matter is we all got bent over and reamed by sophisticated financiers gaming (exploiting) the system. That is natural for them to do so, the question is for how long will our government stand by and continue ineffective regulation in the name of promoting capitalism. The trend for the past couple of decades has been to decrease regulation in the finance, supposedly to promote capitalism and growth. Under Obama and the Dodd drafted reform bill passed last year we've made some tiny steps to correcting the process, but nowhere near enough in my opinion-and it was a very tough thing to pass those tiny steps with the partisan scene in DC (every GOP voted against the reforms).

Are things fixed? I say no, and as proof I point to this year's gasoline price runup-driven by commodities future trading with grossly inadequate margin requirements. The same trick that was played just a few short years ago as well.

 

[QuantumPion]

While there is a litany of liberals responsible for the housing bubble, the single person you can actually place blame on would be Barney Frank. He is the one whom blocked republican's attempt at emergency reform of FNMA/FHLMC in 2006.

 

[JS80]

Look in the mirror. It's you assholes who wanted to own your own home enabling the government and investors to make it easier which lead to the bubble.