After a year of epic financial crisis, 2009 will - if all goes well - be a time for digging ourselves out of the mess and figuring out how to prevent a repeat. Before we can do that, we have to have some idea of what went wrong. Fox's "far-from-exhaustive list" of the current top eight, "in descending order of culpability": (1) Good Times: the U.S. hadn't been through a serious panic in the memory of most everyone on Wall Street and in government; we began to behave as if one couldn't happen, and were told it couldn't; "blithe behavior begat trouble"; (2) Alan Greenspan: the Fed must do more to deflate bubbles that inevitably precede panics; Fed policy over the past quarter-century has been asymmetrical: it bailed institutions out of trouble, but did far less to restrain them during fulsome times; (3) Twisted Regulation: new institutions have been allowed to grow with little oversight; (4) Wall Street: its leaders did "an atrocious job - rewarding the foolhardy, steering capital to the least productive uses, and running away from responsibility for their errors";rn(5) The Homeownership Obsession: the decades-long, bipartisan government effort to encourage home-ownership (generally a good thing) tragically overshot the mark by turning a blind eye to crazy lending practices; (6) Too Much Money: the flip side of trade deficits was gigantic capital flows into the U.S.: the capital gusher form China inflated the real estate bubble;rn(7) The Myth of the Rational Market: "for decades, the accepted academic response to concerns that the economy might be on an unsustainable trajectory was that markets knew best";rn(8) You and Me: millions of us came to believe we could take on debts we couldn't repay, a misconception fostered by lenders and politicians.
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