Blame somebody for the financial crisis!

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If nothing existed there would be no financial crisis. Ergo, I blame everything and/or God.

I blame the investment bankers.

Sound reasoning.

Why can't you people leave my mom alone?!

I'm to blame. I did it because I'm sick of everyone thinking it's funny to pick on Ryan Seacrest, but never stopping to think he's someone's mom too.

Now I have to go tell Mommy-Ryan the internet is picking on me.....again!

Who really caused the financial crisis that is ruining the US economy? I'll give you a hint, it starts with the letter J!

You misunderstand me, I'm not talking about morals, but about Moral Hazard, the idea that people will act differently when they are not fully exposed to the risks created by their actions. In this case, mortgage brokers made sketchy loans to unreliable people because they were then able to pass on the risk to others in the form of mortgage secured bonds, in essence getting the reward of the sales commission without taking the risk of a not being able to collect on the mortgage, it's a classic moral hazard. What I'm saying is that it's not realistic to expect people to not take advantage of a situation like that when it occurs, so the people who bear the brunt of the blame are the oversight people who should have seen this coming and put a stop to it.

I usually don't post in threads that I haven't read, but since this one is a poll and I was the first to vote for none of the above, I made an exception.

The you choice was tempting, but I have a problem using that word when I don't know who I am talking to. Greedy American bankers was close, however it is not the bankers themselves that I blame, it is their bosses: meaning the stockholders of the banks and investment firms who either voted for them, gave them their proxies, or threw them in the garbage because they were making money and that is all they cared about.

there is no blame to be ascribed.

it is caused by a catastrophic global panic attack.

i have very simplistic and concrete ideas on it, so spare me. i do not watch the news with much attention. i am not much affected yet.

as far as i can see, the sub prime lending started the ball rolling. people who could never get a prime loan because of their financial limitations were granted loans at higher than normal interest rates but over much longer periods so their monthly payments were less. they were poor bets.
the bankers did not foresee that these people would renege on their loans. they must have assumed that the average lower paid person was responsible and conscientious enough to make the lower payments over a longer time.
they certainly would not have embarked upon that strategy if they could have seen the future.

so i "blame" the middle class american dream in a way. very many people accepted the loans knowing they would not be able to pay, or thinking their house price would rise.

i saw a an american news special on TV where they were interviewing mortgage loan defaulters.

they were average "moms and dads". they felt blameless.
one i remember said in a thick southern accent "well ahh been strugglin' most o mah lahf to provahd for ma wahf an cheeldren. 'n' then some banker comes alowng and says "hey you wanna house? an a plasma screen? an a four wheel drahv? an a poool?" well ahh jiz coodn't say no to thayat! ah mean... look at ma keeds there? could you say no? course ahm gonna say yes".
then the interviewer said "well you must have known you could never afford the payments"
and he said "well yeah but ah mean...it's lahf in the sun for a while ya know? when it awl came to an end, ah juz fahled for bankruptcy and wahked away" and he smiled as if it was not his fault.

so when the eventuality of all those empty and dead loans (toxic debt) were revealed in balance sheets, there was a feeling that a cavernous disaster was opening up under the banks because no one knew the extent of the doomed loans.

this caused panic and pandemonium, and there was a mass exodus from the stock markets and other types of liquid investments. people sold their stocks and even got their money out of banks because they believed the only safe place for it was under the bed.

this panic has gripped the world, and no one is confident enough to buy anything speculative because there is such volatility.

but i realize that nothing has disappeared. (this is going to be very concrete but it is my perspective)

there are still the same amount of dollars in the world today as there was before the GFC. no assets have been destroyed, and all the things in the world that were worth money before this all started, are still there. the houses that could not be payed off are all still there. the factories that have reduced production are still capable of full production.

there has been no destruction of any asset that constitutes the worlds wealth.

the problem is all notional. the notional value of things is at the mercy of confidence.

confidence is not a hallmark of a panic attack, so the world will have to suffer it's seizure, and then rest for a bit and then get back up and wonder why it all happened. it will be forgotten within 3 years unlike the depression which was a real loss of value started by the dust bowl thing.

ok i am not an academic and i just said my perspective.

I do not see the issue with factoring. Of course, if you sell a debt, you get less money than it is worth, which is the compensation of the buyer for the risk. My SO has some experience with factoring and it is trading probable future earnings into lower, secure earning today.

Excuse my bad wording (and probably bad grammar) here.

I disagree - maybe in the long run it would be better to let the banks fail, but it would not be a quick recovery. To the contrary, a large number of people that had nothing to do with poor decision making would suffer for years from the collapse.

Perhaps a bit more specific: What do you need for founding a bank, a brand new one? People how know to run a bank and capital. When the big banks went bust, there would be enough qualified people on the labour market and the amounts of capital currently raised by the goverments is far in the extent of any capital the banks ever had for there own. I think such a new system could be set-up within a few months, if not weeks.

Letting the banks go bust would destroy the "toxic assets" in one go - it is not the first time that a "big bust" cleared the market. The example of the Banque Royal or the South Sea Company do show how this works quite well.

If really money would be needed to protect than it would be better spend in protection small savers.

I have one Italian phrase to tell you: TUA MADRE.

(That's "your mum", in case that wasn't clear, LOL)

I disagree. The people who are going to suffer for this were collectively the owners of the old bank.

You need to understand Monty, the only thing that is going to cease to exist is the corporation and that only existed on paper in the first place. It was a legal entity with no physical substance.

I saw this coming after the S&L Bailout when that other former President Bush went back on his famous "read my lips, no new taxes" promise. If you let people suffer the consequences for their own mistakes, they might learn something from them, and if they do they are less likely to do it again.

You're all wrong it was those over priced bastards on Magarathia, just consult the oracle Douglas Adams and receive the answer


For a good analysis of the present crisis check out
http://www.wsws.org/media/nb-lecture-1208.pdf

Yes it does have the world Marxist in the title so try and get past that as it is a very insightful article

Last edited by DentArthurDent on 11 Feb 2009, 4:09 pm, edited 1 time in total.

Damn Yankees!

Oh wait, I am a yankie doodle....

Capitalism and what's in your wallet?

OK - I do understand: But it is not the first in human history that things were set-up (developed) in a way that no reasonable control (even via simple selfishness) happened.

So my question remains: Why not let the whole thing go bust and rebuild the financial system? The current lecture governments are giving is: We bail out, even you made the biggest bull since World War II, even under the risk of jeopardising the middle or long term stability and liquidity of the government.