The Start Of The Financial Crisis

The current state of our economy might be in worse shape then at any other point in our history. Many believe we will eclipse the Great Depression. I, personally, do not feel we will end up going to that length. However, the economy is battered beyond comprehension.

What started this mess? It seems impossible to decipher from the media. Both parties are going back and forth playing the blame game. Nobody is willing to take personal responsibility for what occurred. That is not how our leaders behave.

Here is what played a role in setting the ball in motion. Before going any further, this article is not absolving the liars and cheats on Wall Street of their part in it. Nor am I overlooking the total ineffectiveness of members of the Bush administration's economic team (Cox and Paulson in particular). However, I am going back to the basic foundation that allowed for greed and dishonesty to occur.

Someone came up with the ingenious idea that making home ownership available to everyone was a good idea. It was not. There was a little know act passed under Jimmy Carter called the Community Reinvestment Act which was expanded under Bill Clinton. Basically, this act told banks that they had to lend money to people even if they did not qualify. Failure to do so would result in penalties under law.

I want to stop for a second and examine that. Here, in America, the government told private businesses that they had to engage in an activity which was bad business. I doubt this is the concept the Founding Fathers were after. It sounds closer to Marxism to me.

Anyway, private companies had to lend to people who were not able to repay the loans. This was the mustard seed that started it all. It created a new market of loans called "subprime". Most of these loans ended up being owned by Freddie and Fannie, the organizations which were taken over by the government recently.

Many will claim this assertion is hogwash. Do not believe them. They are the ones who have an agenda. They want to place the blame elsewhere so they can retain power. That is how politics works.

If you want to check the validity of this point, do your own research. Here is a hint: follow the money. That will usually help get you to the truth. Who did these organizations donate the most to. Research the election contributions records. Then look to see who was protecting these organizations while others were calling for reform. This process will uncover more of the facts than you will receive watching 1,000 hours of television news.

Remember this insight the next time you hear someone blaming Wall Street or Bush for all the countries economic ills. They are only partially responsible.

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