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April 26th, 2010
12:03 PM ET

Wall Street didn't cause crash of '08

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/POLITICS/02/23/poll.economy/art.wall.st.gi.jpg caption="Wall Street should not be blamed for the crash of 2008, says Frum."]

David Frum
CNN Contributor

Financial reform? Not exactly. The bill before Congress does nothing to address the fundamental background causes of the crash of 2008.

Wall Street may have been the instrument of the crash. But the crash was made elsewhere: in Washington's failed policies for middle-class families - and in China's distorted rush for economic growth.

The story is not a simple one. But I hope you will pay attention to the details. If you don't, you may find that the pocket that has been picked is your own.

As you've heard, the crash begins with the huge excess load of debt built up in the last two decades by American households. Why did Americans borrow so much? Some like to tell a story of irresponsibility: We borrowed too much because we were self-involved yuppies who just could not deny ourselves the latest flat-screen doodad for our McMansions.

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Filed under: Economy • Wall St.
soundoff (6 Responses)
  1. Mike in NYC

    Since Americans are not all required to take Econ 101, or even Lemonade Vending 101, we're forced to watch as myths such as these play themselves out. Have fun.

    April 26, 2010 at 2:52 pm |
  2. Chris Hehr

    Giving zero down mortgages to people who did not have the ability the make the payments was a major cause. And it aint over yet.

    April 26, 2010 at 1:53 pm |
  3. Pat Nesberg

    Thank you for bringing this out in the open. I tire of comments stating that a person's income is directly related to his productivity. Money has been draining from the bottom half for a long time. It should have become obvious when gas prices went up, that one price change is devastating when incomes are so tight. It does not do our economy and even our wealthy any sustainable good to ride the backs of labor so hard that they don't have money for taxes, and they suddenly stop consuming all together when one cost goes up because disposable income is so low. How many people in the bottom 1/3 can afford to live alone and own a used car (fully paid for) and pay taxes and save anything? Of course they buy Chinese goods. They absolutely have to.

    April 26, 2010 at 1:52 pm |
  4. Darnell Morgan

    Good read. I don't think its far so simple to walk away from Wall Street or Main Street and say they were not to blame, though I give the author a lot of credit for exposing the China involvement as hidden driver.

    Someone who makes only $50k a year doesn't need a 1/2 million dollar mortgage. So they are wrong for borrowing more than they could afford, and so is wall Street for loaning it to them in the first place. Greed man, pure and simple.

    It would seem this entire world is based on greed. On all sides, and by all parties.

    April 26, 2010 at 1:22 pm |
  5. Sharon

    Leadership? what leadership! our Government turned a blind eye and made wallets of Wall Street Fat and there should have been regulation and caps on how much homeowners could borrow instead exotic loans andd products where born.... They are partly responsible?"Please, big banks banked on the middle class" to Wall Street it is just a hiccup and an Aneurysm for the whole country and world! Now!

    April 26, 2010 at 12:57 pm |
  6. Tim Gibson

    And nothing our leadership has done, or plans to do, will curb further crumbling of our economy. The perfect storm is far from over while we linger in the eye.

    April 26, 2010 at 12:13 pm |