I just got to get it off my chest:
I find the idea that a Joe Schmoe is responsible for the biggest financial crisis since the Great Depression mind boggling, to put it mildly. It is like accusing kindergarteners for failures of a nation's educational system. It is like not seeing the forest for the trees. It is like not being able to raise above the analysis of the isolated, individual cases, where common sense and personal responsibility are indeed key.
Most would certainly agree that spending beyond one's means, in general and over a prolonged period, is certainly not prudent, smart and responsible. And, on an individual level, it would be hard not to agree with it. But, and this is a big one, when the whole nation does that, as Americans do, is it still only a matter of individual responsibility? When it is considered un-American and unpatriotic not to "shop till you drop," "keep up with the Joneses," buy newer, bigger, better. When "spend, spend, spend" is considered as patriotic as apple pie, is it still just a matter of individual responsibility? Oftentimes, what is common sensical and individually responsible behavior is not necessarily the most beneficial for the group/system as a whole (for theoretical underpinning, see the work of the Nobel Prize Laureate John Nash - or see the movie The Beautiful Mind with Russell Crowe)
If you build a huge building on a shaky foundation and you knew about it, whose fault is it when the building collapses? The foundation's?
If only the irresponsible Joe Schmoe did not default, or if only bankers knew he would do it... everything would be fine, right? But the problem is, Masters of the Universe (read: bankers) not only knew he is going to do it, they counted on it. Their PhD whores built sophisticated risk-analysis models to work around those expected defaults. They packed it and repacked it, combined, sliced and diced it, until the risk became unrecognizable and smelled so good it could be sold to the next sucker. And that next sucker could not care less about the risk as he knew he would sell it to the even bigger sucker, each pocketing the bonuses along the way. So, Joe Schmoe's single mortgage got packed and repacked, sold and resold, so many times, intertwined with so many other PdD-supported products, leveraged so high, that when he defaulted (as expected), the effect was hundred, thousand times bigger than if it were just him and his banker.
So, in conclusion, it is not that his default brought the system to its knees. Turns out, PhD models* were simply wrong... ooops!
But sure, blame it on Joe Schmoe.
* If I remember correctly, one of those guys hoped to get the next Nobel Prize for his risk models... I am sure he is currently "exploring other career opportunities"