By Stephen A. Myrow
Without question, smarter regulation crafted with an eye toward the modernized structure of the financial system could have at least mitigated the present financial crisis. This, in turn, could have prevented the onset of the ongoing economic crisis. However, it would not have stopped the incipient cause of our current precarious situation -- the housing crisis.
After all, to refer to the cause of our collective predicament as the "financial crisis" is a misnomer. The financial crisis is only one of three distinct, yet interconnected crises -- wedged between the "housing crisis" and the "economic crisis" -- that continue to weigh on both Main Street and Wall Street.
The housing crisis started on Main Street. It was a traditional asset bubble with many catalysts, including politicians aggressively promoting homeownership, mortgage brokers focused solely on commissions and homebuyers with desires larger than their wallets.
Wall Street, primarily banks -- with the help of excessive leverage, under-regulated securitization markets, poor risk management, lax regulators, credit rating agencies and investors in search of greater yield -- misplayed the housing bubble and created the financial crisis.
The financial crisis clogged the gears of our credit economy. This exponentially amplified the adverse impact of the housing crisis, creating a broader economic crisis that spilled back on to Main Street in the form of the Great Recession, complete with double-digit unemployment.
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