Readers responed to a question I put out, using one poster's famous line, "'Who opened the gates to Dumbass Ranch?' I am working on the housing bubble problem and the solution (making sure it never happens again). IMO, the source of the problem must be clearly identified, which is why I hope you guys will take up this question and help me out."

"This was in the W&W post yesterday: 'In the wake of the financial market turmoil that arose over the summer, there has been a remarkable lack of finger-pointing so far over the cause of the crisis. But one observer, Tom Schlesinger, the founder and executive director of a think tank that has followed the Federal Reserve closely for the past decade, believes the blame for the crisis falls squarely on the Fed and accuses the central bank of 'regulatory foot-dragging' that has harmed the public.'"

"I have come to believe the root cause of this financial mania can be traced to the unaccountability of three groups: the US congress, the Wall Street investment banks and the Federal Reserve. So I ask you, who did open the gates?"

One said, "U.S. Congress gets voted in by popular election. If financial mania can be traced to the U.S. Congress failing to keep accountability, then it can be traced further to the U.S. public for failing to keep accountability on the people it elected."

"As an ex-political science major, let me tell you incumbancy is a big issue. 97% re-election rate in the House."

One points at the Street. "I lay it entirely at the feet of IBs, hedge funds and other assorted greedy pigs of that ilk. Of course, the Fed accommodates them but the masterminds of this money grab are on WS."

Another singles out economics, "The irresponsibility in housing finance is merely a symptom of a greater, more sinister problem. It goes hand in hand with 'deregulation,' the 'laffer curve,' 'supply side,' etc."

One sees a human element, "The root is Greed (…the love of money…), normally held somewhat in check by Capitalism, ie greedy crooks keeping each other in check through competing self-interest. But lack of transparency has subverted checks and balances. The housing bubble has been a classic pump-n-dump. To assign blame, just ascertain who got the vig."

I replied, "Yeah, but we can really fix the human nature stuff. What I am searching for are the players and institutions that we could take action on to prevent a housing bubble in the future."

One looks at a bigger picture, "If there has been a remarkable lack of finger pointing it’s because they are all co-conspirators. The very magnitude of corruption from the lowest levels of private sector extending through the government all the way to the highest levels, along with other national events, should awake all freemen to a sense of our awful situation."

So did this poster, "The housing bubble is just an asset bubble by any other name, so the answer to ensure that a new housing bubble doesn’t blow is to ensure no more asset bubbles. What inspires bubbles? 1) Mania - human nature, unchangeable. 2) Fraud - human nature as well. 3) Unwise investing. People follow the mania and make it more manic. But unless they’re fraudsters, then it’s just stupidity."

"Let the market hand them their lumps. If we force stupid money to lose value for investing in mania, and control fraud future bubbles will inherently be small."

One saw a political angle, "I think this scam has been more political than anything. I believe it was all about gun’s & butter."

And another take, "My answer is more in the category of 'what' opened the ranch gate, not 'who.' In the past, it was generally accepted that certain people probably should not be lent large sums of money. That principle got replaced with the idea that home-ownership was a universally- desirable, universally- attainable goal. Politicians pandered, lenders grew greedy, and our gatekeepers, the federal regulators and local property appraisers, especially, capitulated."

One saw a chain of events, "I think the roots go back decades. In 1987, the stock market collapse and the Federal Reserve dropped Fed Funds to 0%. This caused the markets to rebound and did not impact the dollar. Federal Reserve intervention in routine markets became the rule."

"In 1994, the Federal Reserve in its March, 1994 meeting even questioned whether their policies would lead to asset bubble growth. In 1995 all reserve requirements were lifted on bank lending on houses for loan amounts less than $1.4MM. In 1999, the Glass-Steagall act was rescinded, allowing banks and financial institutions to take unprecedented risk. Et voila."

"This housing bubble is just one aspect of an enormous credit bubble. I blame the Federal Reserve."

One looked at a societal trend, "I think a demographic factor has been at work. When Boomers were young, the focus was on competition for good jobs. When Boomers reached mid-career, they became more interested in speculative investing and less interested in working. Couple that with the tendency of people over 50 to become 'self-employed' and you have a huge increase in the number of realtors AND in the number of investor/fixer/flippers."

"An astute observer (Grantham?) has pointed out that Boomers cannot all cash out simultaneously, they are just trying to sell their assets to one another, or to each other’s children. It can’t work out."

"How to prevent another housing bubble? Easy. This one will not be repeated until forgotten. I’d say two generations or maybe two and a half. Sixty years or more."

Another blames securitization, "When banks lent out their own money they had to be careful to be sure that the borrowers could pay it back. When investors started to buy the loans from the banks (and later the non-bank loan originators), the banks didn’t have to be careful."

"Add together no risk assement by the loan originators and desperately inadequate risk assessment by the securitizers and investors, no regulation to fill in the gap and innumerate borrowers and you have a recipe for total disaster."

One asked, "Ben: I’m confused by your comments on who is responsible. Ultimately, isn’t it the individual players? No has put a gun to anyone’s head and forced them to invest or buy houses. The minute blame is shifted to banks, government or Fed, doesn’t that allow all the individuals to become victims?"

One posted this from the Times, "Henry Paulson, the US Treasury Secretary, is seeking to persuade the White House to offer financial compensation to American mortgage lenders that try to help troubled homeowners by renegotiating the terms of their loans."

"It is understood that Mr Paulson’s proposals are meeting significant resistance within Washington, where it is perceived that such a move would be a bank bail-out scheme."

The Associated Press. "If you want to see a congressman squirm, mention a multibillion-dollar bailout for the housing market crisis. The apparent discomfort contrasts with reality: most risky home loans made near the end of the housing boom can't be salvaged."

"The unfolding crisis in the $10.8 trillion U.S. home loan market is so widespread and so complex that many experts question whether the government can do much to fix it -- especially if a bailout isn't on the table."

"'Some people are just in houses that are just way out of reach for them,' said Douglas Elmendorf, a senior economics fellow at the Brookings Institution, noting that politicians do not like 'explicitly appropriating funds for this.'"

"Congress, the White House and bank regulators have little ability to prevent defaults and foreclosures, said Karen Weaver, global head of securitization research at Deutsche Bank."

"'It's unfortunate, but it has to play out... We need home prices to come back to reality,' she adds."