There is more than enough guilt to go around...but at the very heart is policy settings put in place by Democrats. Republicans tried to rein it in but failed for a variety of reasons...mostly to do with self serving, gutless politicians of
both sides but predominantly the left. Once you have put a policy of 'affordable housing' in place and made damn sure everyone knows about it how brave does a politician need to be to stand against that even when it makes perfect sense to do so and is ACTUALLY in everyone's best interest...including the people suddenly finding themselves in 'their very own house'. There is not a polly on the planet that brave...they spend there lives totally dedicated to getting re-elected (2 year senatorial terms in the US) so it would be a brave Republican indeed who would allow his Democrat competition the sort of free shot being labelled as 'anti affordable housing' would provide.
Socialist policy settings allowed human nature to do the rest. I never get over the stupidity, or more likely dishonesty, of people claiming to be caught out by 'the Law of unintended consequences'...to my mind this is just a cop out..."Its not my fault, I didn't expect that to happen".
Utter BS!
Human Nature being what it is, it is usually pretty damn easy to work out the logical consequences of an action.
You lean on a couple of Govt backed banks like Feddie and Fannie to facilitate home ownership for people who would otherwise not qualify.
They make it known to banks far and wide that they will buy up such mortgages.
Banks get fees and loan officers get a % of the loan 'products' they sell. Historically they were constrained by prudent banking practices but now they get to pass on all the risk to a third party that is Govt backed.
What happens next is not a result of the law of unintended consequences...its perfectly predictable....Millions of people get home loans they wouldn't have got before before and banks/Mortgage brokers/loan officers make lots of money from fees while the banks they actually work for have zero risk. Pretty soon the banks are inventing all sorts of new loan products as they continue to lower the bar to get more 'risk free' loans out the door and fees in the door.
For a fair old while Fannie/Freddie make lots of money...the housing market is booming (that's what lots of cheap money sloshing around does...it creates bubbles) soon the actual street banks want a piece of the action too. What can go wrong after all...house prices always go up...don't they? If a % of the mortgages go bad we just sell em up...no worries....WE CAN'T LOSE!!!!
And while we are at it lets extend them lines of credit (yet another new product) to buy 'stuff' based on the 'ever' increasing 'equity' in their homes....we REALLY cannot lose remember.
As an aside a mate who IS old enough to remember 16% interest rates and the last recession, and the one before that, said to me about a year ago "Chuck boom and bust is a thing of the past - 'they' are smarter than that these days".
Hell even that moron Brown got up in front of an audience and said that - Boom and bust is a product of human nature - it will NEVER be a thing of the past.
When well educated successful people convince themselves of that what hope for mr and mrs average min wage worker?
Apparently the tech bust with its attendant unemployment of LOTS of VERY, VERY, VERY smart mathematicians gave us CDSs, CDOs and sundry other credit derivatives...they went to work for the investment banks.
Banks like to insure against risk..the people actually selling the product may be too young to remember the last recession but the people RUNNING the banks certainly
are old enough to know better.
Pretty soon credit derivatives are a boom money producer too...EVERYONE piles in to get their piece of the action...
this is what happens near the end of a boom cycle...its no mystery its just human nature...it has always happened this way...but everyone is also 'insuring' themselves against default...AIG et al are making a KILLING on selling insurance for CDSs/CDOs etc.
All this credit was VERY highly leveraged...The US Government repealed Laws that dictate, for VERY good reasons, how much leverage is allowed...they deregulated laws put in place after the Depression that were designed to mitigate against just what has happened...because what has just happened in the last year is pretty much what happened in 1929/30.
But of course Greenspan et al were much smarter than the people running things in the 1920s
I think it is a little tough to 'blame' those who took out the mortgages...human nature being what it is you could hardly expect them to say no to cheap money to buy their own home...but you can certainly blame the pollies and the CEOs of Fannie/Freddie/AIG/Morgan Stanley etc etc etc.
But it starts with the Politicians and their policy settings...everything else flows from there.
The world is experiencing a MASSIVE de-leveraging of credit...that is what puts the lie to Swan/Rudd/Henry's claims of 4+% growth in just a year or twos time and why they will never get the budget back in the black. For that sort of growth we need to US/Japan/China etc to be buying lots of stuff...but the de-leveraging will assure that sundry greatly reduced asset values won't allow credit to be extended in the way it has been lately...without that credit we can't have 4+% growth any time soon.
It will likely be 60 years before we see 'growth' like we experienced in the last 10. It will take that long for everyone who experienced this one to die and for direct human memory to fade and the next Alan Greenspan and sundry pollies to be so arrogant as to believe they 'know better' again.
Its just human nature.