>>>Interesting perspective.
>>>
>>>http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSKSoiNbnQY0
>>
>>Regarding the Bloomberg article, the truth of the matter is that a lot of well informed people, including Bernake himself, did not think there was a housing bubble in 2005. (See http://www.washingtonpost.com/wp-dyn/content/article/2005/10/26/AR2005102602255.html)
>>
>>In the UT I see many who are friendly to one of the political parties trying to blame the other party for the mess. That is understandable, but please take a look and listen to the show below for an interesting take.
>>
>>What I conclude from the show, if it presents reliable information, the culprit seems to be good old fashioned fraud by those issuing worthless loans and I presume also by those at Fanny and Freddy, who bought them without asking enough questions. I'd bet a lot of money passed under the table. The US needs to send many people to jail to provide some future deterrence while trying to save the system from collapse.
>>
>>Transcript of the radio show: http://www.thislife.org/extras/radio/355_transcript.pdf
>>Listen to the radio show: http://www.thislife.org/Radio_Episode.aspx?sched=1242
>
>C'mon, Alejandro, you can't send rich people to jail. They stole enough money to have the best lawyers. Besides, if they go to jail, the whole system will crash, or so they say. Bluff, blackmail, bull... anybody's guess.

Yet that is exactly what needs to happen, and in an exemplary manner. If you read the article you will see that not only many at the top who set up what turned out to a be a huge scam need to go to jail, but also many foot soldiers: the loan recipients who lied and the loan salesmen who forged loan applications etc. It won't bring the money back, but it may make investors, borrowers and lenders think twice about crossing the line in the future.

The root problem is that when it comes to mortgage backed securities, which pass the risk from the originator to someone else, there needs to be appropriate risk control and verification to prevent fraud, but the very concept of regulation has been out of in fashion for a while now.