What created the financial meltdown?

I'm still researching the financial meltdown and all the original causes of this mess.

Lending discrimination suits by the Clinton Administration and community activists to force banks to offer loans to people who could not otherwise qualify. Securitization of mortgages my Freddie Mac and Fanny Mae with a false AAA credit rating. Credit default swaps, what may have been paper insurance not backed by real assets, for these bundled securities. Perhaps greed and confusion, given these very complicated realities, on the part of bankers.

Many people are likely responsible. Bankers must take responsibility for the debt because it was debt they assumed. I will not hold my breath for community activists and government officials who may have been responsibile for this situation to take responsibility. They just don't do responsibility. It's not their thing. That's the beauty of politics. There's always someone else to blame.

And though they don't take responsibility readily, this video and article by Ed Morrisey of Hotair does seem to make a pretty good case that discrimination lawsuits and Freddie Mac and Fanny Mae securitization may have been one of the original problems that caused this mess.

The quotes that explain the entire financial meltdown

And here's the video of Andrew Cuomo unknowlingly giving us all a peek into the beginnings of the country's financial problems.

Andrew Cuomo: Subprime Loans "Affirmative Action"



I'm still researching, so I'm not ready to point fingers, yet. But this does look like the most convincing theory to me, at this point, given what I've seen.

Unintended consequences. They are abundant in political and economic life. And we are often so quick to defend our intentions that we very often will not take responsibility for these consequences we did not anticipate.

The beauty of the market is that someone has to take responsibility. And there is a better opportunity for people to learn the lessons. The downfall of political solutions is that people are constantly shifting blame and noone wants to take it because it is so easy to escape it, given how irrationally we function in the political world.

This was exactly Terry Moe and John Chubb's point in their book Politics, Markets, and America's Schools and why they and I favor school choice and creating a non-profit and for-profit market for schools instead of the increasingly multi-layered government driven public education that you see today. People will always make mistakes. That cannot be escaped. What we must be concerned with is in what situation are they more likely to take responsibility for their mistakes and make corrections for their failures.

Markets are a better environment for people taking responsibility for those mistakes, long-term, I am convinced. And politics creates every incentive for people to avoid their mistakes and enforce them on others.

I'll keep researching this mess. In the meantime, I am deeply concerned about those who may have played a serious hand in creating this mess making economic policy for the next 4 years.

Thank goodness there are enough more thoroughly thoughtful and informed people in the market to not confuse politics with substantial knowledge about the market and the economy. We are going to need them.