Understanding the Credit Crisis

If you want to understand the basics of what caused the credit crisis that we are now experiencing, watch this video:

There are, as I see it, two overarching causes of the credit crisis: 1) greed and 2) well-intentioned but misguided liberal lobbyists.

Greed

Greed sufficiently describes the actions of the thousands of mortgage brokers and the bankers who became so eager to push mortgages through that they would either fraudulently fill out the mortgage application or persist on more deals being underwritten.

Liberal Lobbyists

The liberal lobbyists are well-intentioned because they believe that they are doing a great thing by advocating that everyone should have a right to own a house, but they are misguided because the fact of the matter is not everyone is qualified to own a house. These persons should rent. To force the issue causes a false market that will inevitably crash, causing everyone who is qualified to pay for the non-qualified.

Who Pays

The most painful lesson of this credit crisis is that regardless of who is responsible for the crisis, we all suffer. Because we all suffer, we must be vigilant to ensure that we don't repeat our mistake. I'm not suggesting that we impose governmental regulations on banks. What we should have done is recognize during the Clinton administration that by forcing banks to give subprime mortgages we were sowing a credit crisis. Instead of allowing greedy banks to be bailed out, we should allow them to fail. In short, the government played a huge role in either initiating the problem or not allowing the guilty to reap what they had sowed.