Business journalist David Lee Smith labeled the current economic crisis as complex, and largely a result of removing common sense regulation from the mortgage industry.

"You could have Secretary of the Treasury Henry Paulson standing in front of you, and he couldn’t tell you exactly where we are or how we got here," Smith said in a journalism lecture at UT.

Smith points to faulty lending practices over the past decade, specifically changes in lending requirements, as one of the key problems that has caused the current economic crisis in the United States and abroad.

In the early 1990s, a potential buyer had to place a 20 percent down payment and prove sufficient income to repay the loan in a timely fashion. Even with this documentation, potential buyers still regularly turned down.

During the middle to late part of the decade, the Clinton administration pushed for Fannie Mae and Freddie Mac to purchase more loans from minorities and lower income areas.

During the middle to late part of the decade, the Clinton administration pushed for Fannie Mae and Freddie Mac to purchase more loans from minorities and lower income areas. Smith believes this left the mortgage industry in a position to issue almost anyone could get a loan, regardless of income and credit history.

In 1994, 64 percent of households owned their home, however, as a result of the increase in loan distributions more than 70 percent owned homes by 2004.

Loans to minorities and low-income families increased by nearly 80 percent. Prior regulations of down payments and evidence of income started to disappear. This led to the distribution of bad loans on a much more regular basis.

“Mortgage companies were basically giving mortgages to people who couldn’t finance a chicken sandwich,” Smith said.

Banks, over the same time period, began relying on Fannie Mae and Freddie Mac too much. If they could not get a loan through the other channels, they could sell the loan to one of two companies.

As many financial analysts, Smith believes Fannie Mae and Freddie Mac became too big a part of the mortgage industry.

This allowed investment banks such as Bear Stearns and Merrill Lynch to buy large blocks of mortgages from other banks. These securitized groups contain all types of loans, including some that will go into foreclosure.

The fault for the current crisis, according to Smith and most other financial experts, should be spread among the many groups who passed on the opportunity to stop the crisis from happening.

Congress, in Smith's opinion, is at the top of the list. In 2003, a bill was proposed to reign in Freddie Mac and Fannie Mae, but it failed.

If countries stop buying the U.S. bonds and loans, then God help us all.  David Lee Smith, Financial Expert and former JEM Department Head

Smith also labeled the rating company, Standard and Poor’s, as a key culprit. The purpose of Standard and Poor's is to look at each mortgage individually and give a rating as to how the bank did.

"The banks were very cavalier in giving out mortgages," Smith Said, "and the rating companies really weren’t doing their jobs."

Smith said the best way to fix the problems is to bring back regulations such as requiring down payments and better evidence of income. Consumers also should be more conservative and be sure they can afford a loan before taking it.

He believes the economy will rebound this time, but that a bigger issue is looming. During the crisis, Smith said, the national debt ceiling was raised to $11.2 trillion.

Overseas banks have been hit hard as well because they owned securitized groups of mortgages in the U.S. Smith said we have relied on other countries buying our securities far too much in recent years.

“If countries stop buying the U.S. bonds and loans, then God help us all," Smith stated. "We better hope these countries don’t lose confidence in the U.S. so much that they stop buying U.S. securities.”

Smith, former Journalism and Electronic Media department head at UT, has degrees in journalism and business and specializes in economics and energy. He has worked on Wall Street in various capacities and now writes for fool.com, a business website.