By
Ben Rooney, CNNMoney.com staff writer
NEW YORK (CNNMoney.com) -- The mistakes that led to the housing market crisis are clear but the probability of a recession is still difficult to determine, according to William Poole, president of the Federal Reserve Bank of St. Louis.
In a speech to financial planners Wednesday, Poole outlined the mistakes that he thinks led to the turmoil in the housing market and the increased risk of recession it has brought about.
"Will housing sector problems push the economy into recession? It is too early to tell right now, but what we can do is to examine the current situation closely and try to learn from it," Poole said, according to a transcript of the speech.
Poole faulted borrowers who did not do enough "homework" when signing up for adjustable rate mortgages, which are now resetting at much higher rates.
He also pointed out that some borrowers were guilty of giving "misleading or false information" about their ability to repay the mortgages they took on.
However, financial professionals bear most of the blame for the subprime mess, according to Poole
"I can understand the mistakes many financially naïve borrowers made but have a hard time understanding how so many investment professionals could have been so wrong," he said.
Mortgage brokers, investment banks, rating agencies and investors are all to blame for the mistakes that have undermined the housing market, he said.
Mortgage brokers and lenders approved loans that borrowers could not realistically afford. Investment banks securitized mortgages of dubious origin. Ratings agencies lacked foresight in their analysis of mortgage-backed securities and investors relied too heavily on the ratings agencies to assess risk.
As for the motivations behind financial professionals' lack of prudence, Poole had this to say:
"Many observers point to greed, but I prefer a different explanation. Shortsightedness rather than greed explains actions that led to losses of tens of billions of dollars and the failure of many financial firms."