Who cause the meltdown?

There is still a debate over the causes of the financial meltdown of 2008 in the forums and blogosphere on the internet. When conservatives try to point out the culprits in the financial meltdown of 2008, they point to the government. They will tell us that the government forced banks to make loans to people who can't afford them.

I've seen this argument trotted out many times by conservatives, so let's put this into context. Banks are run by very smart and well educated men and women. They know the laws, they know their rights and they have access to legal counsel and representation. Did they fight this in the courts? I don't remember any headlines about monumental court battles of bankers with good intentions, fighting the laws that "forced" them to make loans to people who could not afford them.

In fact, "Liar's Loans" were the dirty little secret of the day during the bubble years.

To put this into perspective, look at the legal wrangling over Obamacare. Look at the fighting, the posturing and the resistance being put out by so-called conservatives against Obamacare. They're fighting Obamacare in Congress, the state legislatures and in the courts. Did you ever see anything like that for the laws that forced banks to make loans to people who could not afford them? I didn't. Did you?

No, it wan's the government that got banks into trouble, it was the profit motive that caused banks to make loans to people who could not afford them. Fortunately for the bankers, they managed to privatize the profits and socialize the losses and risks. How did they do that? They were able to sell the loans into mortgage backed securities, doffing the loans onto investors looking for a sure buck. To ensure their survival, the government was only too happy to bail out the banks who were holding the securities and worthless loans.

Who were the banks making loans to? Middle class people stuck with wages that had been stagnating for 30 years while greater than 90% of the gains in production due to innovation went to the top 1%.

There might be blame to go all around on the meltdown. People bought loans they couldn't afford because almost everyone believed that housing prices could continue to go up faster than inflation without a correction. Real estate agents were happy to perpetuate the lie until they were caught in the bursting bubble. Governments were happy to take in the tax revenue from the bubble. Economists who missed the bubble still have their jobs, but hey, who's counting?

You can blame the government all you want, but no one can honestly say that the banks were forced to make loans to people who could not afford them leading up to the meltdown of 2008.