The major European powers will feel their share of lending pain,and no doubt their crisis’s will be worse than America’s. Why is no one looking at the root of the crisis: ( guarenteeing bad loans with public dollars ie Freddie Mac and Fannie Mae). This was certainly the root cause. Greed on Wall street was a given and based on the rules set up by Freddie and Fannie, the bankers were just playing the game.

Banks became loan originators, knowing they sell all the crappy loans off on the secondary market as long as they could meet Freddie Mac or Fannie Mae guidelines. The US government even made it so that ITN’s could be used instead of social security numbers on these loans, allowing lots of non US citizens to take advantage of the US taxpayer guarentee of Freddie and Fannie.

The US will spend another 700B plue another 150B plus who knows how much to pay off bad loans. BUT.. When will the US subsidized bad loans stop? How will those rules change. When will we go back to 20% capital reserve on loans. Just think about it. The capital reserve percentage ( 20%, or 10% or 5%) .. is basically the loan’s buffer against market price flucuations. So when you give out loans with no buffer because you think it is fair.. you are exposing whoever takes those loans to catastrophic failure if the prices don’t rise forever. The government guarentee of Freddie Mac and Fannie Mae distorted the market, allowing banks to make loans that they knew were shakey and pass the risk off to the taxpayer. The awful legislation that allowed Freddie Mac and Fannie Mae to distort the markets drove the US crisis.

Why throw more money at the problem? Just fix the damn laws and send those overseeing Freddie and Fannie to Jail.