For some time I have been arguing here on PA that the economic crisis was caused by deregulation of the financial industry and the reckless greed this made possible. Others have argued that the fault lies with liberals pushing home ownership, with all the little people who foolishly purchased homes they could not afford and made commitments they could not fulfill. This struck me as a “blame the victim” maneuver.

Now I have some credible support in the form of a former managing director at Goldman Sachs who says the same thing I said, with numbers to back her up. She has written a book on the subject and is interviewed here. (The first quote is from the interviewer, the rest from the author.)

“It wasn't reckless borrowers and their subprime loans that built the house of cards that has come crashing down around us over the past two years, but an out-of-control finance sector running on a perverse set of incentives that made it incredibly profitable to essentially throw caution to the wind and take on incomprehensible amounts of risk.”

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“The people that blame the Community Reinvestment Act for the avalanche of predatory lending are missing the true numbers that represent the situation. Only $1.4 trillion worth of subprime loans were extended between 2002 and 2007. On the back of those loans, the industry created $14 trillion worth of various types of assets and borrowed up to 10 times that amount using those new assets as collateral.”

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“For the money spent on subsidizing the industry, the government could have bought out every single outstanding mortgage in the country. Plus, every student loan and everyone's health insurance. And on top of that, still have trillions of dollars left over.”

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“In 1999, a bipartisan Congress repealed Glass-Steagall in a 90-8 vote ([Arizona's Sen.] John McCain didn't vote). Two senators in particular, Byron Dorgan, D-N.D., and the late Paul Wellstone, D-Minn., warned of the impending cost to the American people of recombining the banking system and allowing any commercial bank to merge with any investment bank and insurance company. They were right.”

http://www.alternet.org/story/143573/former_wall_street_play...

Before you unleash a partisan rant you might want to read the interview as the author is very hard on President Obama and Timothy Geithner as well.