13 People You Can Thank for the Economic Crisis

by Andy H on March 25, 2009

The recession is hurting everyone. The American people are pissed, and rightly so. But who should we really be pissed at? Let’s take a look at the specific people responsible for the current economic crisis.

  1. Tar and feather the scapegoats! She's a witch! I'm a populist dumbf*$%!Regulators: for lowering the capital requirements of banks, and for allowing banks and mortgage brokers to lend to bad-credit homebuyers via ARMs that were clearly irresponsible.
  2. Myself: for being unwilling, as a voter and taxpayer, to demand–and pay for–a sufficient budget for Federal regulatory agencies.
  3. Myself: for securing a mortgage I didn’t understand and buying a home I couldn’t afford; I didn’t bother to read the loan documents, and I bought a home that cost four times my annual income, rather than twice my annual income, which would have been sufficient.
  4. Greedy bankers and mortgage brokers: for turning a profit by creating exotic financial instruments, whose risk they couldn’t adequately price. The fact that they couldn’t adequately understand and price the risk involved didn’t matter, since they resold these instruments to “suckers” (e.g., pension funds).
  5. Myself: for allowing greed to influence my decision making process. I thought I “needed” a larger home, because my brother-in-law had one. Besides, the real estate market is only going up–a larger house should appreciate even faster, and I’ll make a ton of money when I sell it in seven years!
  6. The Fed: for being unwilling to endure even a slight, healthy recession–or a slight, healthy dip in homebuying–and lending money at insanely, artificially low rates for over a decade, which ensured the continued expansion of the bubble.
  7. Myself: for thinking 5% mortgage rates were the norm, 7% real estate appreciation rates were the norm, and 2% inflation was the norm. For not calling out our leaders when their two solutions for everything are borrow more money and/or print more money.
  8. Myself: for throwing out long-proven financial rules of thumb–such as, my investments in equity vs. bonds should be 100 minus my age–and trying to squeeze every possible dollar of return out of my savings and investments.
  9. Myself: for not saving enough; I got a 30% raise three years ago, and instead of regularly saving the pay increase–or even a third of the pay increase–I let my expenses rise 32%. Wants and luxuries turned into needs.
  10. Myself: for thinking the present decade was “different”. Historical home ownership rates are ridiculously consistent. (And lower than they are now.) Historical real returns on real estate are ridiculously consistent. (And near zero.) Why should the present decade be wildly different? Why did I lie to myself and say that it was?
  11. Myself: for letting stupid people and consumerism influence me. Did I really need to buy a late model Jaguar XJ8? At least I paid cash. Still, I should have stuck with the Lincoln Town Car. And saved the difference.
  12. Myself: for participating in a political culture of scapegoating–for taking glee in skewering political figureheads, bank CEOs, and middle managers at AIG. The mess we’re in took fifteen years and 270,000,000 participants to reach its present scale.
  13. Myself: for not taking personal responsibility for my finances and for not caring about the ethical, practical and societal consequences of my decisions. For seeking to blame the external, rather than examining the internal.
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{ 6 comments }

1 Bible Money Matters 03.25.09 at 2:04 PM

In my eyes #1 is one of the biggest. Government required banks to loosen lending restrictions and give loans to people who normally wouldn’t qualify. The result? They are defaulting on their loans by the thousands! surprise!

2 Gabriela 03.25.09 at 7:06 PM

Maybe you should add the book “The Secret” and all those modern gurus, spreading stupidity everywhere…

3 Miranda 03.26.09 at 12:42 PM

I think there is equal blame on Congress, administrations from Reagan to now, regulators, bankers, investors and consumers. At any rate, a general acceptance of unsound financial principles has been pervasive in society over the last 20-25 years. Our main hope is to learn from our mistakes and (hopefully) move on.

4 mwarden 03.26.09 at 7:50 PM

The elements regarding government in your list is misguided. The government did not loosen money standards. The government SET the money standards, where there were previously none. Changing the standard from “none” to “something” is a RESTRICTION or TIGHTENING of regulation. Ok??

And the government is to blame for “allowing” adjustable rate mortgages? Could that statement be MORE ridiculous? It is not the government’s job to “allow” two parties to agree to terms of a transaction. There is absolutely nothing wrong with adjustable rate mortgages. A mortgage rate is either fixed, in which case the bank hedges against rising interest rates by charging you what is essentially a significant insurance premium, or it is indexed to the base interest rate, in which case you are not required to pay that premium.

Was there FRAUD involved in the origination of these loans? Maybe. If so, that is already illegal and there are already entire regulatory agencies devoted to fighting it. If there was fraud, then these agencies FAILED MISERABLY at the only task that they are really HAVE to be involved in (fraud prevention, which is something the market cannot do very well itself). So if the government agency was unable to stop fraud, why is your default solution to INCREASE government and throw MORE money at it?

Doesn’t that sound ridiculous to you at all?

#4… greedy bankers? Are you serious? Are you smoking the same stuff the rest of the media are? Bankers have ALWAYS been greedy, so how does this have any explanatory power whatsoever with regard to the current crisis? And you say that they did not assess the risk properly. Are you sure about that? Have any of these companies failed, except for Lehman? The answer is no. The government bailed them out.

If you are gambling in Vegas with $100, and you put it all on red knowing that if you lose, I’ll come by and give you $75… did you risk $100 or just $25?

Do you understand what a “moral hazard” is? For decades, people who didn’t understand the market have dismissed the idea as meaningless. Do you think these people get it now?

5 Andy H 03.27.09 at 9:25 AM

@mwarden

“The elements regarding government in your list is misguided. The government did not loosen money standards. The government SET the money standards, where there were previously none.”

Only governments print money. Anytime money exists, governments have to decide how much to print.

And I didn’t intend to focus on blaming the government, or bankers, or anyone else in the article (I just included a few of them in the first few points to set up the surprise ending.) The point I was trying to make, was that the entire economic crisis was YOUR fault.

6 Gabriela 03.28.09 at 3:52 PM

Andy, you are responsible only for your personal economic condition. The government is responsible for the economic crisis. But sometimes it’s easier take all the responsibility of a bad condition than accept that someone cheated us. In the first case we believe we are guilty, in the second case we believe we are stupid.
Accept it: you are a victim because you didn’t know all the facts and you shouldn’t have known, but perhaps you could have known. But that doesn’t make you responsible because you could not avoid the crisis by yourself, only some of its consequences in your life.
I’m from Argentina (which means expert in crisis, government corruption and bank frauds). Welcome to the club

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