Who was responsible for the financial crisis?
Obviously the answer is much more complicated than most people understand and certainly more complicated than people like Muck and the right wing ditto heads like to say. According to Muck, the entire crisis was predicated to making loans to people who couldn't pay the loans back.
But the bottom line was making loans to people who had no means to pay the money back. Remove that from the equation, and there was no real estate mania and subsequent fallout.
Actually, this is a very simplistic answer to a very complicated puzzle. Making bad loans was part of the problem, but it's clear that the main problem was the greed of Wall Street.
The financial crisis wasn't the fault of the people seeking loans. And it wasn't the fault of the Community Reinvestment Act (something put in place years earlier) or even Fanny Mae or Freddy Mac.
Much fault can be laid on the high-flying companies and on Alan Greenspan's Fed which refused to start writing any regulations on the home mortgage market until last December and even then, they were not in place until mid-2008. As Michael Hirsh noted:
This mess is mostly a titanic failure of regulation. And the largest share of blame goes back to one man: Alan Greenspan. People mainly fault the former Fed chief, who once enjoyed a near-saintly reputation because of his reputed "feel" for market conditions, for ushering in an era of easy credit that accelerated the mortgage mania. But the much bigger problem was Greenspan's Ayn Randian passion for regulatory minimalism. Under the Home Ownership and Equity Protection Act enacted by Congress in 1994, the Fed was given the authority to oversee mortgage loans. But Greenspan kept putting off writing any rules. As late as April 2005, when things were seriously beginning to go wrong, he was saying that subprime lending would work out for the common good—without government interference. "Lenders are now able to quite efficiently judge the risk posed by individual applicants," he declared at the time. So much for his feel. New regs didn't get put into place until this past July—long after the crash had come, under Greenspan's successor, Ben Bernanke. The new Fed chief's "Regulation Z" finally created some common-sense rules, such as forbidding loans without sufficient documentation to show if a person has the ability to repay.
Calculated Risk has a great ad from Downey Savings, the latest bank to get eated, published during the wild and woolly days of the infallible free market looking for the next set of suckers to setup in loans they couldn't possibly afford.
All so Wall Street could rake in the big bucks.