Do you think this is correct in it’s relation to the current financial crisis in America?
The Real Deal
So who is to blame? There’s plenty of blame to go around, and it doesn’t fasten only on one party or even mainly on what Washington did or didn’t do. As The Economist magazine noted recently, the problem is one of “layered irresponsibility … with hard-working homeowners and billionaire villains each playing a role.” Here’s a partial list of those alleged to be at fault:
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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I think you are right, there is enough blame to go around.
And no matter who wins taxes have to go up, we have 10 trillion in national debt. a lot of financial advisers (those who DID warn us about coming crisis ) say this will ultimately cost us not 800 B but between 2-5 trillion dollars.
doesn’t matter who is the president, we all have to eat that soup.
So in my vote financial crisis doesn’t really play any roll.
It sounds decent. I’m confused on the accounting rule. I’m not sure that I understand. Maybe it’s because I’m hung up on my appraisal for my townhouse saying that it was worth $123,500 when I paid $117,900 for it. I questioned it and at the closing, the “professionals” said that if I could sell it for $123,500 to let them know. I had a 20% down payment for the $117,900. I did a conventional fixed 30 year mortgage. Reading this again, it looks like my situation does not play a part here and is something different.
The lenders believe the assets are actually worth less according to their documents but the market tells a different story? But depending on the market, some houses are either not selling or taking a very long time to sell (more than 13 months in some cases).
Some people let their brains go on vacation? The greed monster took over? I understand finance and knew that real estate returning 20+% returns was unsustainable and not right. Interest rates were very low. That was good but it led to higher prices. Many people couldn’t afford to pay more for housing because salaries and wages were not keeping pace. Of course they wouldn’t. People were ok with it for the short term if prices of real estate continued to jump giving them equity. They could sell their house and move to a house they could afford with that equity.
I think the people got taken for a ride. The only winners were mortgage lenders and corporate executives. Some people that were smart and timed it just right got lucky. But many people got ruined. Jobs are not that stable. People are moving around a lot more.
I think many people like Alan Greenspan had their heads in the clouds. They were not attached to reality. They were ignorant but not smart or astute enough to realize it or maybe they were too arrogant.