Just in case you thought otherwise, it seems that there are some myths about the credit crunch. It looks like there are some good arguments against them:
- “Irrational exuberance”: It was pretty rational to gamble on property in the US, at least
- “Bankers’ pay”: Cash bonuses weren’t the issue (a lot of execs were already paid in stock, and those with the most stock pretty well lost the most in the crash)
- “Capitalism”: Banks used mortgage-backed securities heavily because the regulation in force allowed them to lend more using securitised deposits (that they didn’t necessarily understand) than they could against plain mortgages
The Economist suggests that no-one really knew what was going on. Lots of greed, some stupidity and lots of losses.