Chief among them is the blame cast upon the once-revered Alan Greenspan, who is currently claimed to have set the interest rates too low during the early part of the decade. From December 2000 to June 2003, the Federal funds rate was lowered from 6.5% to 1%, resulting in a large influx of credit into the system which fueled an unsustainable real estate and stock market boom, followed by an inevitable collapse. Others see the chief culprit as the repeal of regulations that had been put in place after the great depression, such as the Glass-Steagal act of 1933. With this act repealed, many claim, financial giants such as Goldman Sachs were able to function as both a financial bank and a commercial bank, and were willing to sell large amounts of sub-prime mortgages and poor credit business loans and, simultaneously, sell the puts against them as well, creating a deadly arbitrage system that the American people had to pay dearly for. Others have blamed the irrational euphoria of the market, claiming that the rates offered by the Fed could not alone have explained the degree of explosion in prices that occurred in Las Vegas, South Florida and the Northeast. The culture worked itself into a frenzy as real estate mania circulated wildly through the media. New TV shows like TLC's "Flip This House" and Bravo's "Flipping Out" encouraged people to get themselves into outrageous debt so they could sell it to someone else for an unbelievable profit. With so many people getting rich it seemed impossible not to work. After all, real estate never goes down in value.
The problem with any one of these theories is that none of them are sufficient to explain, on their own, the totality of the market explosion and collapse. Greenspan would have had to lower points by ten points to produce the results he did in the absence of other significant variable changes. The complex hedging, derivative and poor credit business loans scheme of Wall Street could not have worked were it not for a high availability of credit and a very hungry culture. And the cultural argument cannot explain why so many lenders were willing to dish out the amount of money that they did to flippers who had neither taste nor expertise in home repair.
The reality is that the system was extremely multi-variable and multi-causal. Few, if any, people are capable of understanding it to a functional degree, which means that the layperson is forced to leave it to the experts to interpret. While this makes it a bit easier for us, it also invites people with political motivations to spin the complex story very easily.