RE: Who Should We Find Responsible For The Subprime Mortgage Lending Crisis?
The blame belongs squarely at the feet of the Federal Reserve and the federal government. Thanks to the Department of Housing and Urban Development as well as policy initiatives begun under Clinton and carried over through Bush, home ownership was being pushed to lenders. Lending standards were relaxed as more money flowed into the system thanks to the Fed and the government, both of whom pushed lenders to sign mortgages to people who were not credit-worthy enough to afford a house.
Could lenders have said no? Certainly, but what bank in its right mind would want to say no to what essentially became free money? It was lent out at basement rates to banks, who then turned around and lent it out for profit even at remarkably low APRs. This distortion of the risk associated with lending to people who otherwise would have been unable to afford a house drove the bubble. Without the Federal Reserve and government policy, there likely would have never been a housing bubble, or, if there had been one, it would have been unremarkable and would not have infected virtually every sector of the economy.
I tend to aim in this general direction. In my country over the pond, and I guess its the same there, I always figure that if politicians 'give the people what they want', which has become a never ending feeling of prosperity, it furthers their reign and keeps joe public from looking too deeply into the other mischief they have their generally grubby hands in. Its more about retaining power while keeping the lesser informed people happy as pigs in shit (not wishing to be rude, just expression). And as the first comment from steemed, pointed out, when it all inevitably tumbles we can start laying the blame on the less informed people who were pulled into the pyramid at the bottom "larger theme that attempts to blame low income people for society's problems", while the orchestraters make out like bandits and others lose jobs. We have it in the UK, apparently now its all the 'poor ignorant fascists' who wanted to leave Europe (the language used is appalling because the public went against the desired outcome of the system). This is the same type of bs just one step removed. And so it goes on. Lenders and borrowers are simply part of the messy jigsaw of greed and power. Funny thing is, right now this whole thing is currently repeating itself.