Everyday americans (and europeans for that matter) with a sense of entitlement carried too much credit card debt and signed up to mortgages they couldn't affort.
Mortgate brokers sold mortgages to people they knew couldn't affort them in the long run, convincing them with short term reductions in payments.
Banks packaged these mortages into financial instruments (CDOs) and sold them.
The financial services authorities failed to properly identify the risks of these instruments and categorised them as low risk.
Investment bankers traded these instruments and earned large bonuses accordingly.
Investment banks provided poor long term incentives for sustainable banking, by offering large short term bonuses.
------------------------
The causes can be categorised as:
GREED: everyday people lending beyond their means, investment bankers making short term profits on bad credit.
IGNORANCE: poor financial education of everyday people, lack of understanding of the risk of CDOs
INCOMPETANCE: terrible risk evaluation by financial authorities, poor incentive systems for employees by investment banks
-----------------------
George Bush is at best a dangerous idiot, but to blame the current financial crisis on him alone is small minded.
Log in to comment