Causes of Financial Crisis

Kevin Drum | Mother Jones:

Off the top of my head, here's a list of the various things people have blamed for last year's economic meltdown:
1. Housing bubble
2. Mortgage securitization mania
3. Massive growth of complex credit derivatives
4. Mortgage fraud, growth of NINJA/liar/HELOC/option ARM/etc.
5. Asian savings glut
6. Long-term current account imbalances
7. Ratings agency flimflam
8. 2007-08 oil shock
9. Overuse of leverage on Wall Street
10. Easy money policy from Fed
11. Reliance on bad risk models (VaR, CAPM, etc.) that led to consistent undervaluation of risk
12. Too much debt (both household and financial sector)
13. Government efforts to increase homeownership
14. Repeal of Glass-Steagall
15. Pay practices that provided incentives for risky behavior
16. Greenspan/Bernanke put (i.e., the widespread belief that Fed would bail out any big bank that failed)
17. Inadequate regulation of shadow banking sector
18. Poor bank capitalization regulations that allowed too much off-balance-sheet risk