Wednesday, September 24, 2008

Who's to Blame? - Again

The last two weeks have been chaotic.

Given that it's an election year, there has been the typical rhetoric by some politicians pointing the blame for the current crisis on the other party.

Let me be clear. NO ONE PARTY IS TO BLAME!

I attended a cocktail party last Wednesday thrown by one of the large international banks for high yield and leveraged loan professionals. There was much discussion about what caused the current crisis.

One of the people I spoke to pointed to the Fed's reaction to the March 2000 Internet bubble as the cause. His point was that the easy money policies of the Federal Reserve, designed to minimize the recession in 2001-02, caused the housing crisis and led to today's problems.

He is, in my opinion, absolutely right that the easy money policies contributed. The key word is contributed.

In reality, this crisis was created by a confluence of factors. The overused term "Perfect Storm" is an apt description of what we are dealing with.

I will post more of my thoughts on this over the next few days. Please feel free to contribute to the discussion.

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