[mdda]

As someone actively involved in valuing and trading structured products, since their first (below the radar) crisis in 2001-3, I really don't understand where this idea about the roots of the problem being the government came from : Except that it was manufactured by politicians for their own ends.

The housing bubble (IMHO) had much more to do with the rating agencies getting overconfident in the validity of historical default data, and being lead by the nose (by investment banks) into areas where the models were bound to fail. One of the core modelling assumptions was that house prices could never decline across the USA as a whole. Everyone in the food chain was happy to let the rating agencies use this idea as a foundational assumption in the modelling of RMBS - because everyone creating new structures (and providing enormous numbers of mortgages) made money as long as the game didn't stop.

Also at fault were the regulators, who entrusted the Rating Agencies with determining the leverage in the financial system, by using their ratings ('AAA', 'AA', 'BBB', etc) as the basis on which bank's capital was used. Simply achieving a AAA rating (which was always possible : the Rating Agencies published their models, leading quants at investment banks to optimize against them) meant that banks could buy enormous quantities of the assets (since they were basically risk-free for capital purposes). Oh - I could go on and on, but most people will only read my first paragraph anyway...

Long story short : I'm frustrated that the financial crisis story is being told and retold by politicians with an agenda, most of whom should have said something at the time... And didn't.

[sounds]

I'll keep an open mind - who should have said what, when?