So, i was catching up on some Yglesias and saw this post:

But even though the deflation of a housing bubble would lead to economic problems, it’s just not the case that “the economic crisis” (as folks have taken to calling it) was primarily caused by the rise and now fall of an asset bubble in the housing sector. Such bubbles and their collapse are problematic, but also somewhat banal. We had one just a few years back when the dot-com stock bubble collapsed. That provoked a recession and the loss of a lot of paper wealth in the stock market, but there was no crisis. There was no crisis because the big movers and shakers of the finance world didn’t build a giant house of cards built on the assumption that tech stocks would continue to rise in value indefinitely. Some people made bad bets along those lines, of course, but nothing close to the scale of what we’ve seen recently.

And the essence of the crisis is right there. Not in the deflation of the bubble as such, but in what was done on top of the bubble with leverage and so forth so as to create a situation so precarious that credit markets were on the verge of total collapse a little while back. It’s the people who did that who deserve blame.

This is a very important distinction.  All too often you hear people saying “Well, this all started with the mortgage meltdown…” but there’s a lot more going on than that.  Yes, the mortgage meltdown was a problem, but it wasn’t nearly as problematic as financial firms leveraging all of their assets 50-1 betting on mortgage-backed securities.  That’s your real root cause of the financial crisis.

Let me put it this way, if I coat my body in gasoline because I like the way it smells, then someone ends up lighting a match near me, and I get third-degree burns all over my body, it would be true to say that this all started with the match.  But it would be important for me to recognize that wearing gasoline as a perfume is really high-risk behavior, and therefore was the real root cause of the entire issue.

This is a big one.  It has found its way into just about every conservative’s talking point repertoire, swiftly followed by the story of “coddling” by Democrats who “blocked” oversight.  This is another one that I don’t have to do much work on, because a news org has rightfully done its job.  From McClatchy:

As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.

Commentators say that’s what triggered the stock market meltdown and the freeze on credit. They’ve specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie’s and Freddie’s financial problems.

Federal housing data reveal that the charges aren’t true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.

Check out the article for a point by point breakdown.  If you had to pick one fact to remember, then make it this one:

During those same explosive three years, private investment banks — not Fannie and Freddie — dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data.

In 1999, the year many critics charge that the Clinton administration pressured Fannie and Freddie, the private sector sold into the secondary market just 18 percent of all mortgages.

Kind of hard to be the sole driver of the crisis when you’re not even the major player…