The world banking meltdown is a lot like the Christian Bible: no matter what your personal beliefs, you can find something there, somewhere, to back them up.
Too little regulation? Lenders were able to use credit derivatives (such as collateralized debt obligations) to keep loans off their books, without any reliable way of assessing their risk (and thus, their actual value).
Too much regulation? Basel II (the regulatory response to previous banking crises) forced banks to reassess their reserves daily at market value — if the market started to fall, banks had to convert stocks to cash quickly to avoid falling below minimum reserve levels, massively magnifying even small stock market movements and encouraging banks to use credit derivatives to keep loans off their books.
Sinners? People (especially in the U.S.) went out and bought homes that they could never afford to pay for, on the assumption that home values would keep rising, then kept taking out more money against their mortgages to finance regular consumer spending.
Victims? Some of the financial instruments available to borrowers in the U.S., like negative amortization mortgages (pay less than the interest for the first few years), were deliberately designed to sucker in buyers who hadn’t quite mastered grade 5 math.
Too much government? By taking over bad loans from the banks, governments around the world have sent out the message that banks get to gain in the good times, but will be spared the pain in bad. Do they have any more incentive to be careful the next time around? Besides, all the government borrowing, especially in the U.S., has hardly helped the situation.
Too little government? Central banks could have stopped the housing bubble in its tracks by raising the prime interest rate (say, to 5 or 6% in the U.S.). Year after year, they passed on the opportunity, keeping interest rates low to keep the stock markets artificially high, and pumping more air in the housing bubble, leading to a bigger explosion this year than we really needed.
So, whether you’re a political candidate or just a Starbucks pundit, pick the statements above that best support what you already believe, and run with them. No matter what, you’ll probably be right.