Wheel of Blame

By Barbara Kiviat

One of the beautiful things about markets is how they link people. But that also makes it tricky to figure out who causes the messes--like when assets turn out to be worth far less than advertised, credit markets seize up and panic ensues. Ideology colors any attempt to point fingers--Does regulation protect people or stifle innovation? Do companies manipulate consumers, or do individuals make decisions?--but that won't stop us from trying. There's plenty of blame to go around.

President Bush Belief in free markets is absolute in the Administration. Regulation of financial firms, a mishmash to begin with, was essentially hands off at a time when megamoney was sloshing around new places, like overleveraged hedge funds.

Blameless Blame Away

Wall Street Wizards Financial engineers sliced, packaged and sold subprime-mortgage securities for yield-hungry investors on the premise--reinforced by yes-men ratings agencies--that these were oh-so-safe AAA bonds. Oops.

Blameless Blame Away

Home Buyers You can't lose money in real estate. We fell for that. It may ring heartless to blame home owners facing foreclosure, but people living real estate dreams beyond their means provided dealmakers with plenty of fuel for the fire.

Blameless Blame Away

James Cayne Traders like Bear Stearns, led by ex-CEO Cayne, loaded their balance sheets with assets of untested value. When forced to calculate true worth, writedowns followed. Wary firms stopped lending to each other, causing a liquidity crunch.

Blameless Blame Away

Angelo Mozilo Enabling home ownership seems so noble--until lending standards surrender to greed. Under CEO Mozilo, marquee mortgage shop Countrywide helped legitimize the flood of subprime, teaser-rate and no-income-verification loans.

Blameless Blame Away

Alan Greenspan The king of easy money and little oversight kept the economy greased with low interest rates, but now the former Fed chairman is answerable for having made lending too available, especially to people who really couldn't afford to borrow.

Blameless Blame Away