Who's to Blame? Not Just Wall St.

Emptiest words during last night's debates: Both candidates' calls for "accountibility" with regards to the Wall St. meltdown. What they clearly meant was that there needs to be some kind of justice meted out to the SEC and the "greedy" CEOs of the fallen Wall St. firms.

And yet, this is a perfect example of a comprehensive systemic meltdown. Every part of the supply/demand chain had a hand in it.

-At the bottom, you've got optimistic homebuyers and speculators snapping up ARMs with little regard for the "adjustible-rate" part of the deal. As long as housing values keep rising, they're fine (and they've got a home!).

-Above them, you've got the local loan officers, who are all too happy to sign all comers up for these cheap ARMs with little money down and as little paperwork as possible. As long as housing values keep rising, they're fine (and they're making a ton of money!).

-Next up, the Wall St. guys that are buying up these mortgages in bulk, and leveraging themselves to the hilt to do so. And why not? As long as housing values keep rising, they're fine (and earning tons of short-term gains for the firm!)

-At the top, the Wall St. CEOs, who are willing to take big risks to get the short-term profit spikes that their boards of directors and stockholders demand. As long as housing values keeping rising, they're fine (and they've got golden parachutes even if they aren't fine!).

So housing prices soften, a few of those homebuyers default, the bundled mortgages that were so recklessly peddled by the loan officers and snapped up by the Wall St. guys may not be worth as much as previously thought, and over-leveraged companies implode.

All this has been transpiring for almost a decade, and now that the whole system went south, the answer is to blame the greedy CEOs? There was greed at every point along that spectrum, including those foolish "Main Street" home buyers. They're guilty of the same thing as the CEOs, really: over-leveraging themselves to pay for a risky investment.

The outcome seems pretty evenly distributed: the homeowners have lost either their homes or a pile of money, the loan officers and Wall St. guys have lost their jobs, and the CEOs have lost their companies. Everyone benefited when the phony system was up and running, and everybody's paying now that it's fallen.

The only party left that may have actually dropped a ball is the SEC...but where along the spectrum should they have stepped in and said "wait a minute..."?