Do you agree this is what caused the economic crisis?
I found this on fact check
The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap.
Home buyers, who took advantage of easy credit to bid up the prices of homes excessively.
Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses.
Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes.
The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families.
Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates.
Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages.
Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral.
The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market.
An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic.
Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up.
http://www.factcheck.org/elections-2008/who_caused_the_economic_crisis.html
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uh, yep that about sums it up
i blame Clinton
This is what I think.
lets not forget….
Yes, and figure in that individuals, business and our governments (local, state and federal) all operate on credit and are in debt, for the most part. Everyone and every entity in the US should strive to become debt free, as such is the heart of the problem.
All of the above but you left out the biggest reason. GREED, greed on the part of the banks, mortgage companies and the buyers of more house than they could afford.
Yup. The ignorant will like to place the blame on one person. So, I guess I will blame it all on the rat-bsrd Reagan.
It makes sense to me.
I believe the mortgage interest tax cut should be eliminated. It encourages debt. Better debt than unsecured debt, but debt nonetheless. It particularly encourages people to borrow excessively. I’ve had a mortgage for many years and never payed enough interest to make itemizing deductions worthwhile. Because I bought a house I could afford on my middle (okay, lower-middle) income.
I think there are even more than that. The Gramm legislation that de-regulated markets and allowed some financial transactions to be done unregulated is a big one that is missing from the list.
The securitization of mortgages at unprecedented levels.
The historically low capital gains taxes that put more money out there chasing profits.
Some on the list I would disagree with too. I think this collective delusion that housing prices would continue to rise forever is silly. Financial experts knew better, there was just no financial incentive to prepare for it.
And some of these things may have had more weight than others. Tax deduction on mortgage interest has been deductible as long as I can remember, hard to figure how that suddenly caused the housing boom and bust. I’d take exception to that. The ‘mark to market’ thing is certainly an issue, but only once things got so bad that there was no longer a functioning market for mortgage backed securities.
Yes and all of us living way beyond our means for too long.
When we think we need all the toys and have to work two jobs and ignoring our children to we all can have the giant houses living on Visa to pay for our Master Card to pay for the Discover Card to pay for the American Express to pay for a Visa.
We all had a hand in it.
It could be but as an Aussie I have to wonder why we are not slipping into recession when America is? Our economy is quite robust and although we have a few issues with the credit crunch, unemployment is still very low and foreclosures are no where near as bad as in the US.
Australia has pretty much the same sort of policies and tax breaks for homebuyers. One thing that is different though is that our government does regulate the financial sector quite a bit more. In America the current government seems to let big business (including banks) do what it wants. If you do that then big business will do what it wants and naturally consumers will lose out.
And this is why I am against a bailout and want it all to burn baby burn
Very nice.
These two especially:
The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families.
Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates.
Sum up the first one as :the community reinvestment act.
i agree with you. i think it adds up to this. the american economy is still running on mechanisms to put in place in the 1930s to get the country out of a depression by encouraging home ownership and consumer finance; and regulation of the financial system relied mostly on safeguarding bank deposits by tightly controlling banks that took demand deposits. in 1998, in a paper on credit card debt, i had written:
“Consumer debt both as credit card debt and as home equity loans used to consolidate credit card bills, has doubled since the 1990 contraction in a period of sustained growth in GDP and employment. Simultaneously, personal bankruptcies and credit card charge-off rates have also risen to record levels amid intense competition among hundreds of credit card issuers. The thin spreads of issuers and high leverage of consumers creates a metastable system which will be unable to sustain even a small economic downturn without significant volatility, attrition, and social cost.”
absolutely. That sums it up perfectly. This funny video sums it up pretty good as well.