David Brooks summarizes the two dominant views of what caused the financial meltdown. Read his full analysis to understand these two schools of thought.
I don't think its as simple as Brooks describes. There are many sub-themes playing in this tragic opera. Greed may not only be about money. Power and the desire of bankers, lawyers, and Congressional and Executive branch people to 'hold sway' and be 'in charge' is also at work. Remember, these are people with massive egos that need stroking.
The greed and stupidity jingles also played at the bottom of the scale with stupid home buyers unable to afford the ridiculous mortgage terms offered by unscrupulous brokers that played on this stupidity.
For years our culture has been infused with the background hum that borrowing is better than saving and many have bought into the credit culture. Now they struggle with crushing debt. Some argue that the savings mentality that has come into vogue in this recession will lengthen it. Consumer spending is what's needed. Humbug! What's needed is personal responsibility and accountability for one's actions. Savings is one action that instills that trait. We need it for the long-haul health of our society and culture
This debacle is much more than a two-note song. I am convinced that Government has a very important role to play to prevent the country and the world from collapsing into a Depression. Nevertheless, we need to exert great caution to avoid undermining the market system on which representative democracy rests. We must be extra careful that we do not manipulate our flawed system of commerce into one that is worse.
"The greed narrative leads to the conclusion that government should aggressively restructure the financial sector. The stupidity narrative is suspicious of that sort of radicalism. We’d just be trading the hubris of Wall Street for the hubris of Washington. The stupidity narrative suggests we should preserve the essential market structures, but make them more transparent, straightforward and comprehensible. Instead of rushing off to nationalize the banks, we should nurture and recapitalize what’s left of functioning markets.
Both schools agree on one thing, however. Both believe that banks are too big. Both narratives suggest we should return to the day when banks were focused institutions — when savings banks, insurance companies, brokerages and investment banks lived separate lives."