Kass: Four to Blame for the Subprime Mess

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3/14/2007 9:27 AM EDT

As I mention in my piece below, in time the broad-line money center banks stand to benefit from the carnage in subprime lending.

I will be adding to JPMorgan Chase (JPM Quote)), Bank of America (BAC Quote) and Citigroup (C Quote) longs on any further weakness.

My visceral feel is that we have an up day today based on the magnitude of the blood letting yesterday.

Long JPM, BAC, C

3/14/2007 8:52 AM EDT

There are four main culprits responsible for the expanding subprime debacle that threatens to upset the 'Goldlicks' scenario so many are trumpeting. I've listed them in descending order of importance -- and ranked by school grade!:

Culprit #1: Former Federal Reserve Chairman Alan Greenspan was no smarter than a fifth grader.

Greenspan did two big things wrong.

First, the former Fed chairman took interest rates far too low and maintained those levels for far too long a period in the early 2000s, well after the stock market's bubble was pierced. (Stated simply, he panicked).

The Fed's very loose monetary policy served to encourage the new, marginal and non-traditional home buyer -- the speculator and the investor, not the dweller -- to embark on a speculative orgy in home purchases not seen in nearly a century.