I reckon we should count our blessings during the financial meltdown. For one thing, the geniuses who ran all these institutions into the ground didn't get their hands on the Social Security Trust money. Secondly, we don't have all that much money anyway, so we don't have a lot to lose. I don't think I was heavily invested in the financial sector. Thirdly, we get to wallow in schadenfreude for a little while.
I lived through something like this, albeit on a smaller scale, back in the 1980s when the S&L's went down under the weight of greedy, corrupt managers who saw deregulation as a license to steal. Perhaps the geniuses who are taking down the banks now saw deregulation the same way. Some of them may have gotten their training in the S&L debacle.
I'm a libertarian, so I am supposed to celebrate deregulation as if by reflex. But I don't harbor any illusions that the folks who run the deregulated institutions are honest, so I expect that they will try to steal or cheat whenever they can. The deregulation in this instance was just enough to permit the foreseeable evils that we are now experiencing. It could hardly be called a blow for liberty of the sort that a libertarian ought to care about. The whole system is still a fascistic conspiracy between the ruling class and the state. It's just modified to let some rulers skim a bit more off the top. In the end, who will be the biggest losers? It won't be rulers, let me assure you. Somehow this is going to get foisted on the regular schmoes just like the S&L crisis.
I'm keeping an eye on who gets blamed for this mess. Already, my pastor seemed to suggest that it was folks who took out mortgages who were to blame, although I imagine he was just trying to make a point that the congregation could identify with. We don't have many investment bank CEOs in our church. If only those idiots hadn't opted for that bonus room they couldn't afford and then defaulted on their mortgages, we wouldn't be in this mess. Poor deceived investment bankers!
It made perfect sense to get into the housing market and to count on flipping the house before the ARM kicked in. A lot of people made money doing that, and there was no reason to expect that the housing market would go into the shitter the way it did. If housing prices had stayed up, then there would have been a lot less of a problem. The solution, in my humble opinion, is to prop up the housing market by making mortgages even easier to get, not harder. Propping up the banks is like treating hemmorhoids with a throat lozenge. Help the people. Restore their wealth. Houses are all most of us have in the way of an investment. The wealth effect of a healthy housing market feeds consumption, and that heats up the economy. Could this be any more obvious?