First off, I applaud you Elijah Lavicky for taking an interest in and writing about such an important topic. Conclusions on what caused the current economic crisis will determine the appropriate “fixes” and we will both have to live with those fixes for many, many years.

As a summer intern working at the Federal Home Loan Bank of Topeka, I’ve spent part of my summer researching causes of the housing bubble and subsequent crash. I acknowledge it’s a complicated subject and that there were many factors at play and much blame to go around. However, I was shocked by your conclusion that we should let Wall Street off the hook.

Sure, the government played a role. But take a look at the toxic assets in the financial system and where they came from. Wall Street found a crack in the system and exploited it to the max, while stuffing so much money in their pockets they rivaled the drug cartels. Wall Street found that they could package questionable mortgages into so-called private label mortgage backed securities, obtain AAA ratings from the rating agencies and sell them throughout the world. Where did they get the mortgages? Mortgage brokers, who continued to originate loans to meet Wall Street’s unquenchable need for MBS product even though those loans had little likelihood of ever being repayed. But it didn’t make any difference because Wall Street would just tweak the structure of the securities and continue to get the AAA ratings. Bottom line, it was a grand scheme that worked to blow housing prices through the roof until it started to become apparent how far underwriting standards had deteriorated. Fannie Mae’s and Freddie Mac’s contribution: they bought billions of Wall Street’s questionable securities when they either did or should have know better. Listen to what the CEO of Goldman Sachs, Lloyd Blankfein, one of the Wall Street firms that appears to have survived the crisis, recently said: “[the firm]regrets that [they] participated in the market euphoria and failed to raise a responsible voice.” That sounds like a ‘sorry we screwed up’ to me.

True the government wants to help people own homes, but none of the government’s programs required that lenders give out loans to just any average Joe with the time to fill out an application. None of the programs asked lenders to make loans that weren’t secure or sound.

The main cause of the housing crisis wasn’t the government. It was the rocket scientists on Wall Street and in the rating agencies who placed too much trust in mathematical models as opposed to using common sense. It was the mortgage brokers who were all too willing to make loans to people with bad credit, little capacity to repay , and poor collateral because they got paid for making loans regardless of whether those loans would ever be repaid.

The big names of Wall Street said it themselves – they had a chance to stop things before they spiraled out of control, but chose to continue to make money instead. Maybe the government helped to set the stage, but it was Wall Street that had the starring roles.

Again, I appreciate the OUDaily for printing coverage of this important topic and Elijah Lavicky for taking the time to write the article. However I disagree with Elijah’s perspective and opinion; facts should prevail, not political perspective. Please don’t let Wall Street off the hook on this one.

Thank you.

-Lorin Jetter/University of Kansas 2011