“The Federal Reserve is not the cause. This is lame.”
I totally agree. The cause is very simple:
- The banks were making loans to people that they knew would never be able to repay them.
Why would they do something that stupid? Because they didn’t keep the loans for the most part - they sold them to dumb investors who believed the AAA ratings that Moody and other rating agencies attached to them.
It was a total, massive breakdown on the part of the banks, credit rating agencies and investors.
To distill it even further - it was lack of due diligence - even if just one of the three participants (banks, rating agencies and investors) had done their due diligence, we wouldn’t be where we are now.
The Burning Down the House video is just one part of the story. NPR.. odd as that sounds did a good piece on the the other part of the story. It didn't cover they why in the way of Washington Democrats and the failure of regulation of Fanny Mae..but.. well you know they wouldn't.. but they get alot of detail about the how the whole thing came unglued under massive pressure, greed and a boom town mentality that took hold.
The Giant Pool of Money - This American Life - 05.09.2008
Click the "Full Episode" Link below the crumpled dollar bill.