Who is To Blame for the Financial Crisis?

Readers Question: Assuming that corporate executives are to blame for the current financial crisis, what would be some of the reasons why they are to blame?

I am not an expert on this. There might be more issues, but some of the areas of blame include:

1. Mortgage companies ignoring ability to pay and taking unreasonable risks in lending high income multiples to subprime customers. Some examples of subprime mortgage lending was definitely wrong. For example, lending people a mortgage where after 2 years the amount to pay back was greater than their total income (see: dangers of subprime mortgages)
2. Mortgage brokers even joked about lending to the “ninjas” to whom they lent money – Ninja’s means No Income, No Job, no Assets
3. Banks hiding or Being Unaware of the risk inherent in their balance sheets. By getting involved in buying collaterised subprime mortgage bundles, banks took great risks with their balance sheets. They were either unaware of the risk involved in their decisions or ignored the risk assuming the boom would continue.
4. Gambling others Money. The derivatives market was supposed to be a way to help insure the smooth running of financial markets. But, in the hope of making quick profits (and pay bonuses) many dealer took long or short positions on stocks and shares, which magnified their exposure to fluctuations in the market.

See also: Who is to blame for credit crunch

Financial Crisis explained

Who’s to blame for financial crisis at Telegraph