Thank you #8, for showing the negligence of government in this situation. It's true that bankers and those involved in real estate got greedy, but that was the lesser crime. The banks that did not engage in such transactions remained solvent, by the way. The greater malfeasance rests with what our collective government did, and even more so in what it failed to do. Politicians wanting to remain in office used housing as a means of wealth distribution -- "housing for all!" was the cry back in the 1990's. The government, with all its regulatory authority, forced businesses to do what no well-running business would consider, namely, subscribe to sub-par loans. So rather than the government safeguarding the market, or letting it alone determine the value of property, it effectively decreed what that value should be so that its social agenda and "political capital" could be realized. Once again, you can't deviate from supply and demand; doing so destroys economies.
I believe that the fundamental problem was failure of regulatory control on the part of the government, coupled with greed on the part of leaders in the financial and investment industries. It was analogous to watching a pressure gauge on a steam system jiggling into the danger zone and doing nothing about it. Eventually it explodes.
Bankers lent money to people who shouldn't have borrowed. Morgtage companies where accomplices. Individuals were responsible for their own recklessness and unwillingness to live within their means. Wall street did nothing to curb unfair trading practices. Computers on Wall Street ran amok, and the individual investor was at the mercy of the big wigs. Controls were not in place, such that massive computer-generated trades became responsible for the sudden and unexpected collapse of markets.
I am flabbergasted that no regulator has gone to jail for contributing to this massive injury to the American public. Billions of dollars were lost forever. And the government merely prints more money. The government should be held accountable.
I hate to be a contrarian, but I think much of the blame rests on the banks and the federal chairman. In terms of the banks, they did not do their due diligence in giving loans. All they wanted to do was to make money and they made irresponsible loans. They made it seem like buying more and more was a good thing. They have a responsibility to warn people. Second, because the interest rate was so low for so long, it made people borrow more and more. If the interest rate was higher, there would have been less borrowing and more saving. When interest rates are low, you hurt the savers. So, in the end, many are to blame, but the banks must not be made innocent.
And plenty of work to be done on the part of all parties to rebuild in the aftermath. The challenge seems to be getting all the parties to the table and willing to act responsibly in accepting a part of the blame and agreeing to build the compromise measures that will hopefully prevent reoccurrence of conditions that led to the collapse. I see too many business and political leaders who are unwilling to consider any position except their own, which is leading to stalemate and passing around of the blame and very little constructive action toward improving prospects for the future.
I think we all were, to some degree. Rational minds (and i'm not saying I was one) could have looked at the real estate bubble and availability of credit and personal debt and observed that it was fundamentally unsustainable. If you did not buy a house you couldn't afford, or take on too much unsecured debt, and kept your job skills marketable, chances are the crash and recession have affected you little.
That being said, Wall Street and investment bankers knew what they were doing, and how risky it was, and they knew it wasn't their money they were gambling with (and not just gambling, but roulette odds gambling). Blame has to be squarely given to the banking, housing and investment sectors of the economy who saw the quick buck and nothing else, and acted irresponsibly with that charge.
Lastly, the politicians who repealed Glass-Steagall, being too beholden to the very bankers and investors who would benefit from it, launched caution to the wind. This is both the Clinton and Bush administrations, who let it happen, then short-sightedly took advantage of the boom times and talked of an "ownership society", knowing full well it was a house of cards. By lavishly spending money and extending tax cuts while entering two wars, they destabilized the strength of the US economy and limited our options for dealing with the downturn later on.
Plenty of blame to go around.
I agree with #2: the major cause of our financial woes, continuing to today (and the thing that most individuals are most upset about, even if they project their anger on "the rich") was the housing market, bubble, and crash. According to every substantial source I've researched, banks and lending institutions were essentially forced by government to lower their credit standards so every applicant could afford a mortgage and house, regardless of their ability to pay. When the loans came due, the applicants refused to pay. The lenders had to recoup their money somehow; financial loans don't work otherwise. Criminal activity here rests with the government for pressuring banks to lend to bad credit risks, and with borrowers for taking out loans they could not -- and knew they could not -- pay back. The loans should never have been made.
Greed was responsible. It took many forms. First of all, the banks that made illegitimate loans. Second of all, the people who took these loans with adjustable rate mortgages for houses they could not afford. Then, the politicians who did not want to lose campaign contributions from the banks and refused to do anything about modifying loans once the housing market tanks and houses lost 60% of their value.
I agree with all the posts above; nearly everyone bears some sort of responsibility. To the extent that politicians had a role in creating the conditions that made the economy susceptible to such a downturn, anyone who voted for such politicians has some responsibility (myself included). Many of the events that have occurred in the last few years had been predicted for decades.
I have to agree with Post #4. I think that responsibility for this present recession lies with everybody. We could point the finger at the government for their budgetary bills and bailouts; we could point the finger at the financial institutions for their over-lending; we could point the finger at all the consumers for their over-spending; we could point a finger at buyers and sellers on the stock market for their over-exuberance. But, we all had a hand in it. It was allowed to happen, it's here, and it's going to take some time to get out of it. And, even if we do get out on top again, things will never exactly be the same as they were before! It was a close call and a good reality check. In the future, we need to prevent ourselves from sliding helplessly out of control toward the depresson pit, because we may not be able to stop ourselves from going over the edge next time around!
Truthfully, I think we are all responsible for the crash. We stood by and allowed the mortgage companies and the banks to get out of control. Yes, Wall Street was blind, but so were the American people. Even our government officials put blinders on and failed to see the truth in time. Many experts saw the danger coming and tried to warn everyone. Unfortunately, very few people listened to them. Sometimes we don't listen to the things we don't want to hear. We saw ourselves living in a bubble of prosperity. Well, the bubble popped. We can blame others all we want. The truth is that it took all of us to dig this hole and not just a privileged few.
I have to agree with #2. Responsibility is something that we can very easily place on somebody else's shoulders, but at the end of the day, from what I understand of this situation, it is important to accept that it was the choice of Americans to take out mortgages and loans that were far beyond their levels of income that was one of the central reasons behind the collapse. It would be very easy to place all blame on bankers or other easy targets, and I do feel that they have to at least shoulder part of the blame, but at the same time, we should look to ourselves before we shrug off any responsibility.
This is a very hard question to answer objectively. A government panel was unable to come up with a consensus answer and ended up issuing a majority report and two separate dissents, each with its own answer. Therefore, it is clear that there is plenty of blame to go around.
I would argue that the ultimate blame for this lies with us, the people of the United States. We live in a democracy and we are responsible for the people we elect. We also live in a capitalist system and we are responsible for the loans we take out and the amount of money we do or do not save.
The crisis came about because too many people took out loans that they could not afford and because we pressured the government to take actions that allowed the crisis to happen. Basically, we have been greedy. Too many people wanted houses bigger than they could afford. They used home equity loans to buy things they did not need. Too many people did not save.
At the same time, we pushed the government to pursue dangerous policies, or, at the very least, we did not object when government pursued these policies. We were willing to look the other way because those policies were helping to create a stock market boom and we all felt good because our stock prices and home values were rising.
Of course, this is an oversimplification. But we do need to realize that our collective choices helped to cause this crisis and we all have to do our part to get ourselves out of it.