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oversight on how banks reported assets, liabilities, and income it certainly was a factor in this crisis.

Leverage

The main cause of this crisis started with banks who loaned millions and millions of dollars on home mortgages and then leveraged those loans to make their bottom line a look better. The ultimate result of this leverage was that thousands of financial institutions who actually held billions of dollars in mortgage loans, thought they had it made. No one anticipated the bottom falling out of the housing market. Sadly, our society when it comes to money often wears blinders. We have a tendency to believe that the value of everything goes up and when it does start going up we refuse to accept the possibility that it can also come down.

When property values started decreasing, banks began having problems with their balance sheets. These problems were caused because the value of the properties which were so heavily leveraged was decreasing at rates that we had not seen in many years. When the dust started settling, banks quickly discovered that their leverage was gone. The ultimate result was banks were broke.

Fixing the blame

It is possible to blame Congress, Wall Street, the banks, On qualified borrowers, or anyone else that you feel might be responsible for the mortgage mess. The fact of the matter is that there is more than enough blame to go around. Congress, Wall Street, banks, society, and bar wars are all to blame. All were instant gratification society means we must have the latest, the best, and the biggest. All of these things play a role in any financial mess.

Fixing the mess

It will take some time to recover from this mortgage crisis. In fact, it may take more time than even the experts are telling us. Because builders continue to build, developers continue to buy property, and because our banking regulations still have not been corrected, there is a good chance that this mortgage crisis will continue for a few more years. With housing inventories so high housing values may continue to decline. When housing values decline, those who need their home as an asset, that can be borrowed against, will soon find they are unable to leverage their home further causing them to have less money to spend. Too many people for too long have treated their home as a built in credit card.

Summary

Just as there is no single entity to blame for the crisis, no single group can fix it either. There must be a change in mentality - we don't have to keep up with our next door neighbor - by society as a whole. Banks, Wall Street, Congress, and all our regulatory agencies must be held accountable. However, we will only do that when we decide to hold ourselves accountable for our own futures.

Learn more about this author, Doreen Martel.
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