What Caused Our Economic Crisis

[lethal93ta]

http://www.youtube.com/watch?v=NU6fuFrdCJY

[MahoneyRed]

While I'll agree that Dems some years ago made it easier to put ourselves into this there is a good portion of blame to lay on the greed of the lenders in wall street. They actually prefer people to become late on their payments because then they can charge whatever "late processing fee" they choose.

It's a proven fact that lenders make more money by lending to people who are just barely able to pay up the interest every month than those who pay the balance in full every month.

What some Democrats conceived as a way to insure economic growth was used and twisted. There are banks out there that didn't take advantage of this policy and are thriving. JP Morgan is doing well in the failures of their competitors.

An argument could be made, though, that the original regulations were put in place to check the greed of bankers, but that's all hypothetical. I'll agree some blame lies with previous administrations. Ultimately, though, a lot of people on Wall Street messed up, and I'm wondering why no one has been fired yet?

[Pector55]

Ultimately, though, a lot of people on Wall Street messed up, and I'm wondering why no one has been put in jail yet?

fixed!

Don't forget about those CEOs who issued statements concerning the financial integrity of their business, then sold their stock just before the business collapsed. Last I saw, there were two that did this. I expect that a few CEOs will end up in court. Sadly, nobody in Congress will answer to anyone.

[mojo]

I didn't watch the vid but here is my take ...

1. It all started with the bear market in 2000. Alan Greenspan adopted an easy money policy TO CREATE A HOUSING BUBBLE. He did this to try to avoid a recession.
2. This is a part that many people don't mention publicly ... but irresponsible people bought homes that they could not afford.
3. Wall Street took these loans and created nice little packages to sell to everyone. People were using borrowed money to buy them. This increases the possible gains.

All was well until people become too over leveraged with debt and started missing some payments.

4. Then Gov't changed some accounting rules that forced banks to reduce the value of their nice money making packages (all the Billions in write downs).
5. Panic started to spread and kept feeding on itself.
6. Banks stopped lending money, and people/corps could not get access to money.
7. See #5

That's were we are.

[Brown-Bear]

What caused our economic crisis?

We did. The people. Perticularly the lower middle class. People bought houses they could not afford, got mortgages they could not afford, leased their cars instead of buying them, put everything on credit cards with astronomical interest rates.

You can put the blame on the lenders all you want, but no one was forcing anyone to take the lenders money. Did some of the larger banks and credit co-ops practice less than ethical business, sure. But again I say that most of the American familes have lost sight of some very fundamental financial practices. Just because you have checks in your check book does not mean that you have money. Just because you are "Pre-approved" for a credit card does not mean you have to fill it out and send it in, then charge it to the max.

A lesson that I remember getting from my dad that he got from his parents who were born just on this side of the great depression " If you can't pay cash for it right now, you probably don't need it right now". Which ties into the credit cards are for emergencies in our family. Unexpected car repairs, home repair, medical costs etc, etc.

In my mind this is where our current crisis begins, and when things change, will end. When people stop asking for and taking loans for things they cannot afford, then the banks will stop issuing them.
Dave

[Penguini66]

What caused our economic crisis?

We did. The people. Perticularly the lower middle class. People bought houses they could not afford, got mortgages they could not afford, leased their cars instead of buying them, put everything on credit cards with astronomical interest rates.

x eleventybillion!

I'm sick and tired of hearing the Democrats blame the Republicans. And the Republicans blame the Democrats. And the main stream media blame the lenders and the lawmakers.

Like Brown-Bear said, it is the responsibility of the people who took those loans. Borrowed more than they could comfortably afford. New house with two new cars sitting in the driveway living paycheck to paycheck up to their asses in credit card debt. That's the problem but nobody seems willing to talk about let alone lay the blame.

We've dug our own hole. And we've got to dig our selves out of it. It will be tough but we will end up stronger in the end.

That's exactly(well not quite) what I wrote to my representative yesterday after he voted NO on the "bailout" bill. I thanked him for voting NO and asked him to continue to vote NO on any "bailout" bill.

Congress didn't cause the problem. Congress can't fix the problem. The people caused the problem and it is up to the people to live the hardship of the problem and fix it.

[MOUNTAINORACLE]

Greed and people living beyond their means is what caused the crisis.



oracle

[5711-Marine]

x eleventybillion!

I'm sick and tired of hearing the Democrats blame the Republicans. And the Republicans blame the Democrats. And the main stream media blame the lenders and the lawmakers.

Like Brown-Bear said, it is the responsibility of the people who took those loans. Borrowed more than they could comfortably afford. New house with two new cars sitting in the driveway living paycheck to paycheck up to their asses in credit card debt. That's the problem but nobody seems willing to talk about let alone lay the blame.

We've dug our own hole. And we've got to dig our selves out of it. It will be tough but we will end up stronger in the end.

I would rather just fill the hole with all of those irresponsible burdens on society in it, it will take less effort.

[stephpd]

In short -- hedge funds. Much like a game of craps you can hedge your bet. Most of the money on Wall Street is tied up in these side bets. As long as everything runs smoothly folks can make fortunes trading bets. If some part of the economy craps out all side bets are collected.

These side bets include CDO's:

http://en.wikipedia.org/wiki/Collate...ebt_obligation

CDS's:

http://en.wikipedia.org/wiki/Credit_default_swap

CMO's:

http://en.wikipedia.org/wiki/Collate...age_obligation

There are other hedge funds but these are what's causing the fall on Wall Street right now.

It's not just the foreclosures on mortgages but all the side bets that are being called. These hedge funds are in the range of 54 trillion dollars worth of bets on the stock market.

Hopefully we won't have to come up with all this money.

[mojo]

In short -- hedge funds. Much like a game of craps you can hedge your bet. Most of the money on Wall Street is tied up in these side bets. As long as everything runs smoothly folks can make fortunes trading bets. If some part of the economy craps out all side bets are collected.

These side bets include CDO's:

http://en.wikipedia.org/wiki/Collate...ebt_obligation

CDS's:

http://en.wikipedia.org/wiki/Credit_default_swap

CMO's:

http://en.wikipedia.org/wiki/Collate...age_obligation

There are other hedge funds but these are what's causing the fall on Wall Street right now.

It's not just the foreclosures on mortgages but all the side bets that are being called. These hedge funds are in the range of 54 trillion dollars worth of bets on the stock market.

Hopefully we won't have to come up with all this money.

I'm going to have to disagree with you a bit here.

First ... CDOs, CMOs, CDSs, etc are not Hedge Funds. They are basically a fancy type of Bonds.

I'm tired of everyone blaming hedge funds for everything. Are they part of the problem yes. Are there bigger players than the hedge funds in this mess? YES. Guess what, I will bet you that the Pennsylvania State Pension Plan owns some of those alphabets and 99% of the other State and Private Pension funds due also as well as College Endowments. Oh, and millions of individual investors own them too. The biggest players are Banks not Hedge Funds which is why they are failing or getting the crap beat out of them.

BTW ... one hedge fund return more than 100% in each of the last two years trading these ... this is while they where blowing up.