chakravyuha

My list of the reasons for the financial crisis is as follows:

1. The Global Pool of Money – There was a global savings glut and the money was seeking the best returns to be found.
2. Investment Banks
3. Commercial Banks
4. Glass-Steagall Act (and it’s Repeal)
5. Community Re-Investment Act
6. Greenspan’s Put
7. The Housing Bubble and the Politics of Housing
8. Monetary Policy and Interest rates
9. The (Neo)liberalism ideology
10. Debt(Credit?) Instruments (and associated leveraging)
11. CDS
12. CDO
13. Hedge Funds
14. Compensation
15. Greed
16. Hubris
17. Tail Events
18. Regulation
19. Easy Credit (NINA/NINJA loans)
20. Changing nature from Private Partnership to Public Companies – Playing with other people’s money encourages more risk taking.
21. Fat tail events were not factored in.
22. The great moderation was not – it seems business cycles were never really tamed.

Barry Ritzholtz’s list from Bailout Nation (Chapter 19) goes something like this:

1. Federal Reserve Chairman Alan Greenspan
2. The Federal Reserve (in its role of setting monetary policy)
3. Senator Phil Gramm
4. Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings (rating agencies)
5. The Securities and Exchange Commission (SEC)
6. Mortgage originators and lending banks
7. Congress
8. The Federal Reserve again (in its role as bank regulator)
9. Borrowers and home buyers
10. The five biggest Wall Street firms (Bear Stearns, Lehman Brothers, Merrill Lynch,Morgan Stanley, and Goldman Sachs) and their CEOs
11. President George W. Bush
12. President Bill Clinton
13. President Ronald Reagan
14. Treasury Secretary Henry Paulson
15. Treasury Secretaries Robert Rubin and Lawrence Summers
16. FOMC Chief Ben Bernanke
17. Mortgage brokers
18. Appraisers (the dishonest ones)
19. Collateralized debt obligation (CDO) managers (who produced the junk)
20. Institutional investors (pensions, insurance firms, banks, etc.) for buying the junk
21. Office of the Comptroller of the Currency (OCC); Office of Thrift Supervision (OTS)
22. State regulatory agencies
23. Structured investment vehicles (SIVs)/hedge funds for buying the junk