I got back about an hour ago from a lecture about the economic crisis featuring...

[Godhumor]

A spokesperson for the FDIC, a professor in finance and mathematics, and a financial strategist. The 90 minutes was divided first with each of the above talking about how the crisis happened and how we will get out. During his time the professor made the point that the public's "financial illiteracy" was a big part of the problem (i.e. we, the public, screwed up).

When it turned to questions from the audience, the first person stood up and said that we are supposed to trust financial institutions to do what is best for us, and that our financial illiteracy should not prevent us from thinking that banks and mortgage lenders will help to get us mortgages that will allow us to keep our houses.

The professor responded with (paraphrasing), "Learning to calculate present values is not hard, and you can make time each day to educate yourselves on this before going into a mortgage."

Needless to say, the questions turned really ugly at that point.

[Robbien]

1. Who the heck sponsored this lecture? Blame the people and trust banks

Don't anyone dare think about the corporate greed and corruption behind this mess, just focus on the poor schmuck who took out a second mortgage or bought too big a house.

[Godhumor]

2. To be fair, the FDIC woman looked horrified at what the professor said

Though the financial strategist agreed with him. The FDIC woman did say "trust the banks" about where to keep your money, though.

[truedelphi]

3. If a candy maker made some poison candy and encouraged people to eat it

And then let the poison from the candy fill up the reservoirs where the city got its drinking water, so that almost everyone in the city got sick, would anyone seriously blame the people who ate the candy more than anyone else?

There were not enough poor people in this country buying houses with sub prime mortgage instruments to create this mess. No, this mess came about when the financial institutions started betting on the success or faiure of the packaging of those mortgages into bundles called SIV's

And then to top it off the financial insititutions wanted to "protect" the buyers of these SIV's. So they were offering insurance packages that were not called insurance packages, but instead called Credit Default Swaps. So that those instruments were never regulated by insurance regualtions. (Do not attempt a similar dealing if you deal drugs. Calling the marijuana you are selling oregano is not going to get the DEA to ignore you, but for some reason if you are a multi billion dollar financial institution you can divert the regulatory agencies from their regulations)

Michael Moore has simplified the explanation into an easy to digest sound byte. The finanical insititutions were basically using money they didn't have to create other money - an activity called check kiting if you or I did it. And for any amounts over $ 600 in the state of California, you may well go to jail. Or at least do community service. You certainly cannot, as a middle income earner, get the government to bail you out when you do this.