Very good analysis especially the key point "economics is about INCENTIVES". However, it left one party out of the discussion - the politicians (and governments, congress, senate, Fed, etc contorled by them). Who provided "incentives" for both banks and homeowners to grant/apply for excessive debt? The defense of the Fed at the end of article is a paradox. While "you cannot blame the homeowner for taking the loan and then say that Wall Street was a victim of low rates from the Fed." is true, "the Fed" should not be exempted from being examined as if it's not a possibility at all (The sole purpose of the Fed seems to be limited to contradict bank defenders - which is at minimum an understate of the Fed).
I would suggest the author to go back to his/her own key idea "INCENTIVES" and look at who provided incentives to the boom and inevitably led to the bust. (Ordinary people like you an me usually are right - the bigger the entity the more like to be at fault in economy crisis - the Government along with the Fed should be held more responsible than banks, and banks should be held more responsible than individual home owners".
The government by
a) promote homeownership (provide incentives for people who could not afford a home to buy a home, or those could afford a cheaper home to buy a more expensive home)
b) low interest rate (provide incentives for banks to lend as much as possible, and home owners to borrow as much as possible)
single handed provided most fuels needed for this perfect financial storm.
The truth is some people will live a better life by renting, not owning. And those who are pushed up but stayed at the edge, are actually most vulnerable to any fluctuation, and they are actually the ones hit hardest when bubble burst (look at the most people who lost their homes, they are the ones politicians claimed helped most).
No politicians are straightforward, they "promote home ownership" to buy people's vote, but, they are not paying the bill, so they creatively invented this grand scheme - let the banks pay the bill. However the banks are not stupid (or totally controlled by the government), so incentives have to be created for banks to "voluntarily" do it - the Feddy and Freddy? The super low interest rate? These things all sounds like serving a purpose.
And at the end, when bubble burst, politicians jump out and say "you banks all suck, and let me clean up the mess. Vote for me" Unfortunately they got it again and again. And the game of blaming does not even mention these politicians, we know they got their way again this time.
Considering the quality of analysis in this article is fairly high, yet it still omitted government, politician, and even defended the Fed, one would suspect the omission is somewhat intentional - which suggest at least in part, use the 2nd in command as scapegoat - as in many multi-player games -- the crowd wants "justice" and wish to see some of the big guys held responsible, and the biggest guy though, will never blame himself, so the 2nd biggest is pulled out and executed as scapegoat. (Have you seen many big enterprises fire high ranking executive but the chairman/CEO stay intact?).
Not saying Banks are not responsible, actually I agree the banks are more responsible than homeowners, but just like arguing which homeowner is more responsible than the other is useless and misleading, this argument between banks and homeowners is misleading too. It did nothing but shielding the politicians behind the government from being held responsible of their own disgusting deeds.
I would suggest the author to go back to his/her own key idea "INCENTIVES" and look at who provided incentives to the boom and inevitably led to the bust. (Ordinary people like you an me usually are right - the bigger the entity the more like to be at fault in economy crisis - the Government along with the Fed should be held more responsible than banks, and banks should be held more responsible than individual home owners".
The government by
a) promote homeownership (provide incentives for people who could not afford a home to buy a home, or those could afford a cheaper home to buy a more expensive home)
b) low interest rate (provide incentives for banks to lend as much as possible, and home owners to borrow as much as possible)
single handed provided most fuels needed for this perfect financial storm.
The truth is some people will live a better life by renting, not owning. And those who are pushed up but stayed at the edge, are actually most vulnerable to any fluctuation, and they are actually the ones hit hardest when bubble burst (look at the most people who lost their homes, they are the ones politicians claimed helped most).
No politicians are straightforward, they "promote home ownership" to buy people's vote, but, they are not paying the bill, so they creatively invented this grand scheme - let the banks pay the bill. However the banks are not stupid (or totally controlled by the government), so incentives have to be created for banks to "voluntarily" do it - the Feddy and Freddy? The super low interest rate? These things all sounds like serving a purpose.
And at the end, when bubble burst, politicians jump out and say "you banks all suck, and let me clean up the mess. Vote for me" Unfortunately they got it again and again. And the game of blaming does not even mention these politicians, we know they got their way again this time.
Considering the quality of analysis in this article is fairly high, yet it still omitted government, politician, and even defended the Fed, one would suspect the omission is somewhat intentional - which suggest at least in part, use the 2nd in command as scapegoat - as in many multi-player games -- the crowd wants "justice" and wish to see some of the big guys held responsible, and the biggest guy though, will never blame himself, so the 2nd biggest is pulled out and executed as scapegoat. (Have you seen many big enterprises fire high ranking executive but the chairman/CEO stay intact?).
Not saying Banks are not responsible, actually I agree the banks are more responsible than homeowners, but just like arguing which homeowner is more responsible than the other is useless and misleading, this argument between banks and homeowners is misleading too. It did nothing but shielding the politicians behind the government from being held responsible of their own disgusting deeds.
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