Minyanville: Liquidty Pump Runs Dry

Mike Shedlock writes a good article on the Minyanville site delineating the breakdown of liquidity in the commercial paper and money markets. He is very astute and writes many very informative posts on the market and especially on the subprime problems. However I disagree with his summary line in this article:

Slashing rates to 1% was what created this mess. Cutting them to 1% again can hardly be the solution.

Abandoning any type lending standards or credit quality controls is what led to this crisis. Loans to borrowers with good credit scores, adequate income coverage, and with 20% down payments for purchase of homes with accurate appraisals are not defaulting at high rates.
The insertion of many layers of intermediaries between borrowers and investors is what led to abandonment of credit standards. Too many performance based money managers chasing extra yield without personal money at risk, too many Wall Streeters chasing fees (including rating agencies) pushing money at mortgage brokers only too happy to earn fees by lending to anyone who walked in the door, and finally too many unsophisticated borrowers watching "flip this house" speculating on homes. Granted low yields made all this possible but, it did not make it necessary. The final buyers of all these securitized mortgages were too distant from the process and removed all incentives for caution leaving only those incentivized by volume.