Sometimes the implications is that this was because the banks were stupid, or evil but mistaken, and other times it's blamed on federal rules avowedly intended to end racist lending practices and to reduce poverty.
I thought stories like Michael Lewis's would slow that meme, but they haven't. So even though I wrote (emphases mine) ...
Gordon's Notes: Michael Lewis on the End of Wall Street. My God.The meme persists. Funny about that.
- We need to close the rating agencies down. Now.
- When you give 99% of the human race money and power, they cannot imagine that they don't deserve it. They are convinced they are brilliant. I know I would.
- The part where shorting the bad loans with credit-default swaps enabled the generation of 'virtual' bad loans involving real money is mind-boggling.
- I don't think this was caused by poor black people getting too many loans. Do you?...
So let me try again.
Imagine that someone had built a massive amplifier. Huge. It takes anything it hears and it boosts it a thousand times.
Next to it, Yo-Yo Ma plays the Cello.
Everyone is happy.
Until the sound guy hits the wrong switch and the speakers connect to the microphone. The feedback loop blows the speakers, the audience, and the nationwide auditorium sky high.
So who's to blame? The sound guy? The speakers? Or the idiots who built a system that was built to self-destruct?
I guess you can tell what I think.
We'd built the mother of all firewall-free feedback loops. All it took was one thing to go wrong, and the entire setup was going to blow. If it hadn't been the sound guy, it would have been a short in the wires. The explosion was going to come -- one way or another.
Don't blame the sound guy. He's dead too.