Who's to blame?

During the last few weeks, we've seen a bellyful of finger-pointing. But who really caused the financial meltdown?

Greedy Wall Street CEOs are the most popular whipping boys. A Wall Street friend told me that what went on there was nothing short of "collective insanity."

The Federal Reserve's easy-money policy, some regulatory relaxation by the Securities and Exchange Commission, new investment vehicles that made traditional products look so yesteryear, foolish decisions about the quality of these vehicles by the ratings agencies - all played key roles.

Hopping aboard these flashy new vehicles, Wall Street took a ride on a high-leverage roller coaster that seemed only to go up. The firms raced along, accumulating high-yield assets that, in saner times, would have been off-loaded as junk.

Given the heights to which this coaster ascended, the ride down is sure to be scary. But where did this junk come from?

Our current problems stem from the dramatic decline in the value of investments backed by the high-risk mortgages of everyday citizens. These mortgages might involve no money down, interest-only payments, adjustable rates, super-low introductory rates, "stated income" (also known as "liars' loans," as no proof of income was required), and so-called "NINJA" loans - an acronym for "no income, no job, no assets."

Why would lenders take on these high-risk subprime loans? They didn't. Freddie Mac and Fannie Mae did, by agreeing to purchase them from the lenders.

Why would these government-sponsored organizations, with the implicit guarantee of Uncle Sam, back these loans? Politics. Democratic lawmakers conspired with the Democratic operatives who ran Freddie and Fannie in another failed government attempt to help the poor.

As a Senate Banking Committee member, I was lobbied nonstop by Freddie and Fannie executives when, along with John McCain, I tried to toughen regulation of this dangerous practice. Not a single Democrat joined us. Even though we passed the bill out of committee in 2005, it was killed on the Senate floor.

When energy-price spikes fanned inflation and squeezed borrowers, the Fed was forced to raise interest rates, causing payments on adjustable-rate mortgages to soar. The bubble in real estate values began to burst, wiping out whatever equity borrowers had.

None of this financial collapse would have occurred, however, without the participation of one last group of bad actors, a group so powerful that most politicians have avoided railing against it:

American borrowers.

This group includes homeowners who were delinquent on their mortgages - whether the unsophisticated, lured by the unscrupulous with promises of better living, or the savvy, who thought they could make a buck with little risk.

But many others also benefitted from easy-money policy. The truth is we all enjoyed the ride, with record credit-card debt, a negative savings rate, and home-equity loans.

What happened to living within our means, saving whatever we could, deferring gratification, and planning for the future?

We, and I include myself, have gone from "keeping up with the Joneses" to keeping up with the Madisons - Madison Avenue, that is. We have bought the line that "stuff" will make us happy, and that we deserve it, regardless of affordability. That goes for Wall Streeters and their estates in the Hamptons, middle managers and their suburban McMansions, and newlyweds and their starter homes.

I am often asked why, as a senator, I "harped" on cultural issues. The answer is that our beliefs, our choices and our character are not just private matters. They ultimately affect others. If enough people are privately irresponsible, whether financially or otherwise, all Americans suffer. Sometimes the suffering can even be measured in dollars and cents.

We are on our fourth bailout, with a fifth proposed Tuesday by McCain, and the crisis only deepens. Now, both he and his Democratic opponent, Barack Obama, want to shield Americans from the consequences of their behavior by bailing out irresponsible borrowers.

Anyone for a call to pay the piper, combined with an appeal for thrift, modesty, simplicity and sacrifice? Let's hope so.