Saturday, September 27, 2008

Who's to Blame for Economic Downfall?

When a natural disaster strikes, we have no one to blame but God or Mother Nature. Yet, when the economy goes bad, there surely is someone to blame because economy is totally a human affair. Now that the US economy is freefalling and possibly heading for the second Great Depression, many bright minds are asking themselves: How did the economy arrive at this mess? Who's responsible for this economic downfall?

An ongoing poll by Portpolio.com allows people to play a blame game in which they pick the culprit "who's most responsible for the current economic crisis." More than 20,000 people have participated in this poll. Some of the candidates are as follows:

Alan Greenspan

Alan Greenspan

Former Chairman of Federal Reserve, Alan Greenspan was once revered by everyone in Academia as economic genius, but now no one seems to hesitate pointing finger at him as the chief culprit of US economic doom. Overly supportive of easing lending standards and keeping low-interest rates too long, he's in part responsible for the current subprime debacle.

All the time, his low-rate, cheap-money mantra fooled low-income people with second-rate credit into believing that he was looking out for them, but all along, he was kissing up to greedy mortgage lenders, creating financial monsters doomed to self-destruction.

Now, we've seen continous collapses of financial institutions: American Home Mortgage, Countrywide Financial, Bear Stearns, IndyMac, Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch, AIG and Washington Mutual. It all started with overly deregulated policies of Alan Greenspan. Talk about free market. It led to market failure.

George Bush

President Bush

Mr. President must have got bad grades in Economics in college. Or, is it simply that he was ill-advised by his advisors? Obviously, his priorities were not on U.S. Economy, but rather on War against Terrorism. His mind was so occupied with wars in Iraq and Afghanistan and with threats from the so-called axis of evil — Iran and North Korea — that he failed to notice the early signs of failing domestic economy. He kept using the same stimulus gimmicks and rate cuts to keep the economy alive and the Republicans in power. Now that the economy is crashing, his 700 billion dollar rescue plan may be too late, too costly for already suffering people.

Moody's and S&P

These ratings agencies gave too rosy credit ratings for shaky financial companies. Their misleading ratings for failing investment bankers have left the market unprepared for the coming turmoil. When it all came, it was too late for many investors and bankers. People put too much faith in these ratings agencies. And now we suffer.

Hedge Funds

Those who invest in hedge funds are a select group of greedy wealthy investors who engage in short selling of risky investments for quick and big money. Their short selling activities have resulted in roller coaster ride of the stock market. Those reckless hedge fund managers wanted quick profits and made all the odd, risky investments that, when the market began to crumble, had dire effects on the financial market. The recent crackdown on short selling in Wall Street should give a good lesson to those greedy risk-takers.

Angelo Mozilo

Angelo Mozilo

Cofounder of Countrywide Financial and IndyMac, he let Countrywide hand out mortgages like play money. Countrywide, like many other mortgage lenders, doled out easy money to subprime home buyers without income or job verification. But by 2007 Countrywide was struggling with rising rates. Countrywide's collapse and subsequent bailout by Bank of America was a prelude to the current financial market meltdown.

Saudi Arabian King

OPEC

Some don't seem able to make connection between soaring oil price and the current financial crisis. My understanding is that high oil price has caused several airline bankruptcies, inflation and rising costs of living. The soaring gas price and inflation have put so much burden on people that they couldn't pay their mortgages any more. That's how the housing bubble started. People blame OPEC for keeping oil supply tight and driving oil price high. But I disagree. I believe the high gas price is the result of speculatory investing. Who are the real conspirators, Arab nations plotting against infidels or greedy Wall Street speculators? Anyway, it's time to invest in the development of alternative energy resources.

Fannie and Freddie

These government-subsidized, publically traded mortgage companies made too many bad loans on home mortgages with taxpayer's money. When the real estate values slid, their poor management has caused loss of consumer confidence in the housing market and caused their stock prices to hit the bottom. Government bailout of these companies would only cost taxpayers plenty money.

National Association of RealtorsCondos in St. Petersburg, FL

This group of crooks ripped millions of home buyers with fraudulent real estate appraisals and relentlessly put out misleading positive outlooks on the real estate market even as it began to plummet. If they had been honest with home buyers, people wouldn't have bought those townhouses in Naples, Florida or Phoenix and later go default on bad loans.

China

When we get trouble, we blame it on our trade partner. But if you think about it, which country in the world has the greatest demand for the globe's natural resources and caused oil price to skyrocket? Not only that, China continues to give US trade deficit and keeps piling in our dollars. All this weakened our economy and contributed to the current crisis. China must stop exporting poisoned food. It's time we find a new trade partner who knows what moral and ethics truly mean. How about India, Mexico or Brazil?

After all, I believe everyone is both a participant and a victim of this economic debacle that stemmed from greed. And we all have to share the pain for a long time.

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