Today's crisis - whose fault?

People try to blame each other for today's problems in the financial market, but it seems equally likely that it is the fault of no one.

Each investor tried to maximize his profit. Even if they could see that the risks were high with subprime loans, they almost had to take them not to get behind their competitors.

This is a good example of a case where the capitalist system does not work. The system encouraged each individual to take risks that are unsustainable if everyone takes them.

The ironic thing is that part of the cause lies within the planned economy. Fannie Mae was created in 1938 as part of the New Deal, which was US government intervention to solve the mess of the 1929 crash.

The investment banks were a result of the Glass-Steagall Act, 1933, which also was part of the New Deal. This act prohibited banks from both accepting deposits and underwriting securities to avoid speculation and conflicts of interests, so investment banks and commercial banks split into different institutions.

A problem was that this focus on one activity made the investment banks fragile, something which became apparent this year, 2008, when all the five big ones disappeared. (Bear Stearns got problems and was bought by JPMorgan Chase in March. Merrill Lynch was sold to Bank of America 14 September. Lehman Brothers filed for Chapter 11 bankruptcy protection 15 September. Goldman Sachs and Morgan Stanley became mixed banks 22 September.)

And yet, we all saw this happening before our eyes. The Democrats cannot say that the Republicans created the crisis, as both parties have had full access to all information. If the Democrats had been any wiser, they would have warned about the problem earlier on. Neither can the Republicans claim that the Democrats caused the mess, as the Republicans have had eight years to fix it without doing anything at all.

But it does not stop there. The Europeans did not warn about the situation. The Chinese did not see it coming. Neither did the Arabs, Africans, South Americans or anyone else. No one in the whole world was able to convincingly say that this problem was coming.

The conclusion for each and everyone of us is this: I was not alone in not seeing this coming. I am not alone in ignoring how to fix it.