Economic meltdown, and pointed fingers ...

With the economy tumbling, many fingers have been pointed, and many guns have been drawn. It was fascinating to watch as Russia's harball tactics were held hostage as the American financial system had a major hiccup. The Kremlin defaulted on huge amounts of foreign debt, yet the world rebounded just fine; if the United States defaulted on their foreign debt, the world as we know would collapse. The real power of the United States is shown every day as the people band together and make up the greatest economy in the world. It can't be compared to anything. The sum of the European nations is waiting with suspense as the details are worked out for what is building up to be the greatest bailout ever. The already volatile developing markets have been hit with a "tsunami," as the president of the Philippines stated at the United Nations summit this week.

As the blame has been passed around, there are many places to point. My friend Eric put together a starter's list of some places where we could start to place some blame. Through some of our discussions, we have come to the conclusion that not just one place can be the receptor of ALL the blame. Greed, which seems to be well up in all of us from one time to another, has contributed to this mess. But we are creatures of change, and sometimes we need some serious reminders to force us to change our ways ...

Your comments are appreciated. And if you'd like something posted up, email me at young.christopher.mark@gmail.com.

Eric's list

1. Financial Institutuions for not managing risk and not understanding the risks they were taking by buying mortgage backed securities. Had hedge funds, private equity funds, investment banks, insurance companies clearly understood the risks and had the foresight to see the housing market bubble, they would have never demanded these mortgage backed securities and therefore there would be no market.

2. Rating agencies who rated these mortgage backed securities at well above investment grade, making it hard for the above mentioned financial institutions to truly understand the risks associated with the securities.

3. Regulators for not understanding the mortgage backed securites and the associated risks involved with having these on their books.

4. Local mortgage lenders for using suspect techniques to convince people that they could get into loans they had no way of ever paying off. (ex. a maid in San Francisco who's pastor, also a mortgage lender, got her into a $500,000 house on a maids salary). Hoping to refinance after the rate adjusted up.

5. The public for not understanding the loans that they were signing up for, it is the responsibility as a borrower to not "live above your means." When someone wants to give you a loan you know you could never pay back you probably shouldn't sign up for it.

There are many people that can be blamed for this, but as like any economy there is highs and lows. Nothing could have fully stopped the housing market slump, appropriate risk measures put in place of companies could have helped to lower the risk. Regulation like the stuff mentioned in the article could have lessoned the blow. The reality is that no one truly understood the risks involved because the housing market had been growing for so long no one saw an end to it.