Much of the finger pointing over the financial crisis involves Main Street, Wall Street, and the government. But another way to look at it is to see which states have been the main contributors to the root cause of the problem. Not surprisingly, California leads the way as a story in today's WSJ (sub req) makes clear:
Such dramas are repeated throughout California, where the U.S. housing market is arguably at its most troubled. Following years of big profits for bankers and home builders in this state, one-fifth of all outstanding U.S. mortgages by dollar value -- and a higher percentage of risky loans -- are written on homes here. Of the 25 metropolitan areas with the largest home-price declines in the past 12 months, 16 are in the state, according to Zillow.com, a real-estate research Web site.
Those woes weigh on the financial system. Though California represents about 12% of the nation's population, its homes account for 34% of the loans in a typical mortgage-backed security, according to Fitch Ratings. "California doesn't have a Wall Street problem. Wall Street has a California problem," says Christopher Thornberg, principal at Los-Angeles based Beacon Economics and member of the California Controller's Council of Economic Advisors.
Unfortunately, Wall Street's problem is now our problem. Which means America has a California problem.