Tony Woodlief nails it:
For those of you who lack the advanced financial expertise necessary to decipher news surrounding the current mess, I’ve interviewed an expert to help us make sense of the headlines.
Q: How did we get into this mess?
A: Two entities created and overseen by Congress, Freddie Mac and Fannie Mae, flooded the mortgage market with cheap, taxpayer-backed money. Plus millions of Americans accepted the crazy idea that it’s okay to finance more house than you can really afford, using 95/5 and even 99/1 mortgages. It was a toxic mix of incompetence and greed.
Q: Doesn’t Wall Street have some culpability here?
A: Didn’t you hear that part about incompetence and greed? Besides, “Wall Street” is an abstraction. It’s kind of like The Force in Star Wars, or . . .
Q: Congressional oversight?
Q: What’s the government’s plan to fix this mess?
A: They’re going to buy all the troubled assets, and then create lots of rules that give them more authority to oversee financial institutions.
Q: You mean oversight like the kind that encouraged Freddie Mac and Fannie Mae to back millions of housing equivalents of the Bridge to Nowhere?
A: You got it.
Q: How does the average American get in on this “buying of troubled assets” deal?
A: It’s simple: you either need to be the overpaid CEO of a firm that stupidly overleveraged itself in marginal mortgages and their derivatives, or one of those home speculators who bought three houses in Florida hoping to flip them, and is now claiming to have been misled, abused, etc.
Q: What about those of us who only bought a house we could afford, and have been working diligently to make payments?
A: Well, you’ll have to work a little harder to bail out the rest of us.
Q: It sounds like we’re rewarding the guilty and punishing the innocent.
A: Welcome to Washington.