You Don't Buy Something If You Don't Understand It

From Who's to blame for the mortgage mess? by Michael Brush:

But even if we don't know when it will end, we're getting a much better idea of whom to blame. It's a collection of regulators, Wall Street titans and too-smart number crunchers who were supposed to be providing adult supervision. Instead, they chose either to enrich themselves or to look away as others did. Below is a rundown of the worst offenders.

No. 1: Alan Greenspan
In his best-selling book, Alan Greenspan describes how well he managed the economy during an "age of turbulence." Unfortunately, he's largely responsible for the current dose of it.

No. 2: Countrywide CEO Angelo Mozilo
None of this would have been possible without the help of mortgage lenders willing to go along with the charade. There are many of them, but I'd cite Countrywide Financial CEO Angelo Mozilo as one of the most egregious.

No. 3: Christopher Ricciardi
Mozilo and the rest of the subprime lenders couldn't have underwritten all those dodgy home mortgages without having a way to sell them and get them off their books. In this effort, they got a hand from our next culprits: the crafty bankers who created a Wall Street debt machine that repackaged subprime loans so they could be sold to investors.

No. 4: Ralph Cioffi and Jim Kelsoe
The masters of the CDO universe on Wall Street couldn't have gotten very far without willing investors who stood ready to buy the repackaged subprime debt. There was no shortage of buyers because these instruments offered a tempting higher yield.

No. 5: The ratings agencies
Money managers may have been blinded to problems with debt instruments backed by subprime mortgages because of their hunger for higher yields. But in missing the cues, they also got a hand from the credit-ratings agencies, which get paid to evaluate debt products and make a call on the likelihood of default. The three big ones are Standard & Poor's, Moody's Investors Service and Fitch Ratings.

No. 6: Mortgage brokers
Home buyers should have known better than to get into adjustable-rate loans they couldn't afford when interest rates reset higher. But I'd single out another party in the industry for the most blame: the mortgage brokers.

And, of course we can always blame the lawyers:

The lawyers drawing up the mortgage-loan contracts deserve honorable mention as culprits. They could have done a far better job of telling home buyers what would happen when mortgage rates reset, believes Joe Stegmayer, the chief of Cavco Industries (CVCO, news, msgs), which sells manufactured homes.

"The lawyers were drafting contracts that were so complicated, they knew home buyers were not going to read them," he says. "So why not have a summary sheet that says 'You are signing an adjustable-rate mortgage, and the rate probably will go up by this amount.'"