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RE: Who Should We Find Responsible For The Subprime Mortgage Lending Crisis?
The artificially low interest rates by central banks are at the root of basically every major asset bubble.
This was the case for this crisis, as the Fed's low interest rates created a massive bubble in real estate, but other factors such as lending regulations by the federal government added fuel to the fire, the derivatives that formed during that time, and of course the clearly unethical business nature of many involved in the real estate and banking industry. The Fed deserves the brunt of the blame IMO.
I think Greenspan has gone on record saying that he completely underestimated the effect that low interest rates would have on creating the bubble, but this is the problem with much of mainstream economic though. When we hit hard times like after the dot com boom, it says to respond by lowering interest rates which will help pump money back into investment, but in reality it pushes the problem elsewhere.
You probably wanted to say lack of regulation. I am sure this is not very popular opinion in libertarian community but we need to face reality. there was no regulation of real estate brokerage firms. the same problem over and over again.
I'm referring to the Community Reinvestment Act of 1977, which regulates who banks should lend to. This played a big role in the housing bubble. I'm not denying that their was plenty of shadiness going on at real estate brokerages, but they are not at the root of the problem.