People like Barack Obama, Chris Dodd, Barney Frank, and Maxine Waters weren't the major causes of the financial collapse, but by their inaction and greed they certainly played major roles. They provided little or no oversight on firms who were basically bankrolling their political careers.
[Note: For those of you who have not yet seen it, please refer to Ron Devito's blog (link below) for the counter-attack against the latest smears against Sarah Palin:http://sarahs-accomplishments.blogspot.com/2009/04/salacious-coverage-of-palin-family-some.html Also see Gary Jackson's fine blog piece: http://hotrodsnitroandconservatism.blogtownhall.com/2009/03/10/with_sarah_palin,_barack_obama_shows_rod_blagojevich_how_pay_-for-play_is_done!.thtml
The best article on how the current economic disaster came about is in The Atlantic: http://www.theatlantic.com/doc/200905/imf-advice (Simon Johnson, "The Quiet Coup," The Atlantic, May, 2009)
I don't agree with it 100%, but it's still up in the A-plus category. I've been trying for months to write simply and accurately about WHAT HAPPENED? As a staunch defender of capitalism, I'm saddened that so many supposedly capitalist companies or entities borrowed a lot more money than they could repay -- and have turned to the government for bailouts that they really don't deserve.
If the economy goes bad, as it has, companies need to have the capital and other resources to survive, which many of them did not. They had no real plan for long-term sustainability. In a sense, they were something like . . . Bernie Madoff. As long as the economy was booming, Bernie could pay off his new participants. When it stopped booming, Bernie was up a creek.
The banks, insurers, and other who have essentially failed were not running classic Ponzi schemes, but were excessively leveraged and thus totally unprepared for a sharp downturn. Borrowing money to buy stocks or other products when markets are going up quickly appears to make sense. It's what led to all those huge Wall Street bonuses. It stops making sense when the markets head downward for a sustained period of time. (At the same time, credit dries up because yesterday's reliable borrowers have become un-creditworthy.)
Many big companies have borrowed money -- or engaged in contracts -- that they now can't repay. Unfortunately, millions of individuals have done the same, especially in buying houses they couldn't afford -- or chalking up credit card debts they can no longer pay.
Why weren't we told this was going on by elected officials or the media, whose job supposedly is to tell us what's happening and what lies ahead? Party because they were engaged in similar, questionable behavior, incurring huge amounts of public debt to pay off constituents (or themselves).
They, too, were "betting" that markets (including stocks and housing) would keep on going up forever. However, as Isaac Newton discovered long ago, "What goes up eventually comes down." (Of course, the financial industry was providing huge campaign "contributions" to people like Barack Obama, Chris Dodd, and Barney Frank. They weren't about to interfere with that situation.)
Does all thise prove that capitalism doesn't work? No. It proves that capitalism conducted like a Las Vegas "craps" game or "roulette" table doesn't work. Many years ago in NV I bet on red on a roulette table ten times and it came up red . . . ten times. I ended up making more than $1,110, and then I stopped. What if I kept doubling down on red? Eventually, I would have lost all my gains. It was just a matter of time. I got out before I lost everything.
What we saw from financial institituions was that they weren't just doubling down -- they were borrowing tons of money to "bet" on their (metaphoric) roulette table. They set themselves up not to lose $1,100 but rather billions. We as a country have given AIG $170 billion and the money seemingly has gone into a bottomless pit.
The following is from Simon Johnson's Atlantic article:
The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.