Who Was To Fault For The Housing Bubble?

Was it the Fed's easy money policy? That drove up commodity prices, real estate, gold and the like.

Was it lack of adequate regulation?

Until this bust, the mortgage market was reliable. Widows and orphans invested in its bonds.

Something went very wrong over the past decade.

Economist Tom Sowell in his book argues it was the government's fault for forcing banks to lend money to people who had a low probability of paying it back.

The LAT Says:

Federal Reserve Chairman Ben S. Bernanke said that the central bank's low interest rates didn't cause the last decade's housing bubble and that better regulation would have been more effective in limiting the boom.

"The best response to the housing bubble would have been regulatory, rather than monetary," Bernanke said Sunday in remarks at the American Economic Assn.'s annual meeting in Atlanta. The Fed's efforts to constrain the bubble were "too late or were insufficient," which means that regulatory actions "must be better and smarter," he said.

Bernanke said the Fed was working to improve its supervision of banks and had strengthened measures to protect consumers of mortgages and other financial products. But he didn't rule out raising interest rates to stop new speculative investment bubbles from forming.

The Fed chief's remarks were his most extensive on the subject since the housing market's tumble led to the gravest financial crisis since World War II — and perhaps the worst in modern history, in his view.