We're All To Blame For The Banking Meltdown

It was during our usual lunch time“What are we going to do to save the [place name of latest crisis here]?” bull session that the subject turned towards the banking meltdown, the causes, and the cure.

While many of my co-workers can be as partisan as I, but on different ends of the political spectrum, we pretty much agreed there was plenty of blame to spread around for this debacle, starting with Congress and working its way down to each of us.

Despite what Republicans or Democrats are claiming (“It's their fault!!), both are equally culpable in the crisis, ignoring the warning signs and those telling them the system was broken. Easy credit became available for those wanting to buy a home, even those without the means to pay the actual cost of their mortgages. Those that could afford to buy a home far too often bought houses that were too big and too expensive for their means. Mortgage brokers gave loans that were far above lenders ability to pay, particularly after interest rates reset or the mortgagee had to start paying on the principal of their loans, not just the interest.

Government also had its run of borrowing money on terms that were too good to be true. Congress spent money like there was no tomorrow, willing to borrow it from Asia and Europe all while trying to buy votes from their constituents with pork barrel spending that, in the end, did nothing other than line the pockets of those manipulating the game. They weren't living within their means, and made sure that too many of us were doing the same. Everyone tried to ignore the looming problem, hoping that it would just go away. But eventually we reached a tipping point, in this case the housing market cooling off while at the same time many mortgages resetting their interest rates, leaving too many people unable to pay back their loans or sell their homes. As it got worse, more homeowners found themselves upside down on their mortgages, owing more than their homes were worth. And then the foreclosures started.

Mind you, the rising numbers of foreclosures themselves weren't the problem. They were a symptom of the problem, that being too damn many people, including investment banks and quasi-governmental agencies, were far too willing to buy now and pay later. Unfortunately later came all too soon and the people found they couldn't pay the bill. From there it all rolled down hill until it reached the banks, investment houses, insurance companies, and quasi-governmental corporations (Fannie Mae and Freddie Mac).

No one party is to blame, though some must take more responsibility than others, Congress being one of them. They fed the frenzy, ignored the warnings, encouraged the very behavior they now condemn, yet seem unwilling to accept that they were part of the problem.