| Much has been said about who is to blame on the adverse effects resulting from the 2008 financial crisis. Liberals blame the free market and the lack of regulations, conservatives blame liberal regulations, and libertarians think that 2006 -2008 was the harmful part and 2008 the healing. |  |
 | Here is my, Bill Haley’s, take on the issue. There are banking regulations dealing with capital such as deposits (people’s savings accounts) and liabilities (money banks loaned out for house loans). Banks were playing too close to the line(percentage of capital to liabilities) in that if the value of a house (collateral: part of the capital side) were to fall, that the bank would be out of line and would no longer have money to lend and even have to call some loans. |
| in that if the value of a house (collateral: part of the capital side) were to fall, that the bank would be out of line or out of regulations, and would no longer have money to lend and might even have to call some loans. |  |
 While these are the results, the big question is why banks were playing so close to the regulatory line and here is the real cause of the crisis. Many factors contributed, however, I will only address a few key points. | Well, the home values did drop some and the dominoes started to fall in a catch-52, in that banks could not make needed business loans and then people started to get laid off, forcing foreclosures to increase, thus lowering the value of houses more, thus repeating and cascading.  |
 | 1. Tax policies heavily favored banks playing it close. 2. The FED controlling the interest rates, which is the price of the use of someone else’s money, caused mal-investment. 3. Non-free market-low rates on mortgages caused people to be able to afford greater debt for their home, thus driving up housing prices. |
| 4. Liberal policies about minority lending strongly pushed banks to predatory lending, which drives up housing prices and hurting minorities’ credit reports. |  |
 | 4. Liberal policies regarding minority lending strongly pushed banks to predatory lending, which drives up housing prices and hurt minorities’ credit reports. 5. Government is buying up mortgages through Fanny and Freddie and the FED, caused lower underwriting standards, thus resulting in borrowers qualifying for higher loan amounts and in turn driving up housing prices. |
| 6. The preceding list all had the housing market being driven up by Government policies; this caused an inflated (bubble) market that when rapidly deflated caused a financial crisis. |  |
