- Do we blame Government/Fed/Monetary authorities for the lack of regulations in the market? They saw the housing prices going north since 2001. Fed had kept the interest rates low for a longer period since the tech bubble burst obviously with good intentions but overlooking future implications. They saw the questionable practices of banks lending loans to the credit unworthy customers and did nothing perhaps to respect the free market practices. Well, free markets work only in theory and now we know it.
- Do we blame these financial institutions and their highly paid executives who were hell bent on making more money at any risk under the practice called subprime lending? Debt to equity ratio was never an issue for them. Idea was simple; credit worthiness of customers is barely an issue because even if customers default on their mortgages, these banks could make more money by selling the same houses at higher prices in future. But then who said housing prices will always go up? Taking risk is good but it is said that not a well calculated risk is greed. Looking at how many people are losing their bread and butter money, the only thing one can hope for is that tax payers money is not used to pay severance packages for these executives.
- or do we blame people for driving the housing prices like crazy? Isn't it a basic that we back ourselves financially well with sound assets (or savings) before opting for mortgages or any liabilities in general?
“Strive for perfection in everything you do. Take the best that exists and make it better. When it does not exist, design it.”....
Wednesday, 26 August 2009
Who's to blame for US financial market crisis
The question comes to my mind whenever I hear about another financial institution filing for chapter 11 bankruptcy in one of the sound financial system in the world.
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economy
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