Main Street vs. Wall Street: Who's to blame?
I'm tired of the Main Street vs. Wall Street political rhetoric.
It's easy to paint negative pictures of Wall Street fat cats...especially since many of the accusations are true. They are to blame for this housing/credit mess.
But, let's be clear. Wall Street and Main Street are BOTH to blame. Both succumbed to greed and the thrill of a housing bubble.
Main Street collectively bought houses we couldn't afford using financing we hadn't even heard of (who got an interest only loan 10 years ago?).
And the mortgage brokers, banks, Fannie/Freddie, and Wall Street were only too happy to help by creating increasingly exotic instruments to support this irresponsible borrowing.
It's very easy for the candidates to blame Wall Street and conveniently ignore the role Main Street played...after all, it's Main Street's votes they're angling for. But we should remember that Wall Street and Main Street are both composed of humans who will do crazy things in the name of greed. We're all to blame.
I hope the Treasury, the Fed, the SEC, and the politicians remember this when they contemplate future regulations. A few point to remember in this regard:
- In throwing the weak players over to Bank of America, JP Morgan, and Wells Fargo, the government is creating banks that are truly too big to fail. Is this wise? Probably not. Is Glass-Steagall antiquated or needed? My gut is that it's needed.
- Listen to Warren Buffett...derivative instruments do more harm than good. Regulate them as such.
- Don't forget about hedge funds...they're even scarier than the former Wall Street banks.
- Loose credit combined with excessive leverage isn't wise for Wall Street or Main Street.