Even as we fight to recover, there is a lot of blamestorming* going around in Washington right now as to who was responsible for the economic downturn. The Democrats of course blame the Republicans and vice-versa.*(ok, not a real word, but I like it).
So where does the Godfather and The Slow Bleed stand on all of this?
Well, neither party is specifically to blame. That is not to say neither are guilty, frankly, we all are. Some of us saw it coming and people that could have acted to avoid it didn’t.
Here is my top 5 list of what went wrong…
1. Bush administration failed to provide needed oversight. Argue as much as you want about who controlled the House or the Senate, the buck stops at the Presidency. We want to hold all CEO’s accountable for their companies? It starts at the top here as well.
2. Mark-to-Market accounting. An obscure accounting rule allowing companies to book revenue that has not been realized assuming it will be taken to market at a given price. That works great unless the market changes by the time you get there.
3. Home buyers who purchased homes they could not afford. Buyers that relied on the hopes the market would go up and they could sell for a profit. If you couldn’t afford the normal payments (amortized) an interest-only loan was not the answer.
4. Wall Street Companies. They know better than anyone the market will go up and down. CEO’s acted like kids in candy store and forgot the basic rules of gravity. Personal greed outweighed good business judgment.
5. The aggressive lowering of rates. After the dot-com crash the Federal Reserve aggressively lowered rates. Too aggressively and for too long. At some point the market got to control the rate drop instead of the Federal Reserve.
I could go on and on but wanted to limit it to my top five. Anything you want to add to the list?
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I suppose this is where you look for some witty insights to my mind. A "bio" of sorts. Here is the deal... I ride motorcycles, smoke cigars, golf, kayak, fly, race my car through the mountains, write (a lot), and travel extensively. I am almost old enough not to care what other people think about me...almost. ~ Godfather
People living on credit, borrowing against equity, and forgetting that an investment property should have income equal to or in excess of the expenses played a huge roll in the fall of the real estate market. Lenders of course must take their portion of the blame but consumers need to shoulder their share of the responsibility too!
Well sure Z – if you want to go down the “personal responsibility” road…it is much easier to blame others though!