Paul O'Neil on "The Root Cause" of the Banking Crisis

Paul O'Neil as quoted in Business Week, October 13, 2008:

The root cause of this crisis was "A combination of things. It begins with the stupid idea that you can put people in homes who have no income, no wealth, no regular job history. [Then there's the notion ] that in this marvelous world we've created of complex financial instruments, the originator of the loan can throw [the mortgage] out into cyberspace and someone will put a guarantee on it and it'll be amalgamated with a bunch of other stuff. And even though there may be a 3% to 5% risk of default, that's a manageable risk, and nobody will bet hurt. It's all a fiction".


Note: Mr. O'Neil was deputy director of the Office of Management & Budget, then CEO of Alcoa, and finally Treasury Secretary.