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September 30, 2008

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Karen

Always ask why five times - you missed one. Why the need for sub-prime lending. The market was overbuilt; so, to sell all of these extra homes, lending standards had to be seriously modified downward or ignored. The bottom line is the greed of developers, appraisers, realtors and the "gotta have it now" generation's ignorance were some of the root causes of all of this... The F.B.I. is currently investigating and prosecuting thousands of cases of mortgage fraud.

ERF

I greatly appreciate your insightful and convincing post. Can you point me to some good statistics that show the accelerating mortgage default trend to which you refer?

Thank you.

OregonJon

AIG's problem was their inability to meet the collateral calls coming from rating agency downgrades. The downgrades were triggered by the mark-to-market requirements, not because AIG had realized losses beyond their ability to absorb. Now that AIG has been expropriated by the U.S. Government, the SEC relaxes the mark-to-market rule. We've all fallen through the looking-glass of accounting fiction.

Porkov

I no longer see the profusion of billboards and fliers stapled to telephone poles declaiming "We buy ugly houses." To what degree were the flippers and other cynical speculators responsible for this mess, and where are they now? I have some tar and feathers and a band of angry neighbors who would like to show them a good time some Saturday night.

PeeKa

I tell you what went wrong!

http://peekablog.net/2008/10/what-caused-the-financial-crisis/

PeeKa

I tell you what went wrong!

http://peekablog.net/2008/10/what-caused-the-financial-crisis/

Per Kurowski

Dear misinformed friend

The following brief Q&A sessions might be helpful to better understand what really lies behind the current financial crisis.

Q. Who told a German Bank, that had never ever given a mortgage in Germany, that it could invest in securities collateralized with subprime mortgages because their triple-A rating indicated it was without risks and the German bank did so and became the first bank to go into bankruptcy during this crisis?

A. The Credit Rating Agencies

Q. Should not the German bank have dispatched a credit analyst to California to check-up on all the individual credits?

A. In hindsight yes, but can you imagine any German credit analyst proposing to do so being able to keep his job? Of course not!

Q. Who empowered the Credit Rating Agencies as the supreme risk measurers in the world?

A. The financial regulators.

Q. Should not the financial regulators have known this was setting the world up for a systemic risk disaster of a catastrophic magnitude?

A. Yes of course.

Q. Why did they no say so then?

A. There are many explanations for this but the most relevant one is because their discussions always occurred within the walls of a small mutual admiration club, composed by the Basel Committee, the Financial Stability Forum and the IMF, and where all its professionals’ members were stimulated to believe in their own incestuous frequent bs, and never to make questions.


Of course it is not about making the credit rating agencies better at what they do now, which would only dig ourselves deeper in the hole we’re in. It is about eliminating their risk-information oligopoly altogether.

Please help to echo this.

Per Kurowski

http://www.subprimeregulations.blogspot.com/
http://teawithft.blogspot.com/
http://perkurowski.blogspot.com/

immo kopen

I am really happy to see such a nice and beautiful summary of financial crisis.
I have no doubt to believe
the contents in this article related to root causes of crisis. However I think it is difficult to figure out the initiation of this problem followed by
continuity to viscious
circle of crisis and recession. All the facts mentioned in this report could be addressed singly or consider all of them together. Besides, I think the best solution could be to solve for all of these root reasons in a better and well structured new economic model.


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I find it a mood elevating site. You are doing great job, I hope it works well in the future as well.

Peter

Good post.Why does a business need short-term money to pay employees? Products are made before the customer purchases them. In order to make the products, employees have to work, and expect to be paid....
http://undiscoveredequities.com/

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I think if the mortgages were not packaged and sold as investments then there would have been no money to lend in the first place.

Ben Cliff

Chicago bankruptcy lawyer

The main cause for financial crisis is : a "complete evaporation of liquidity" from the market.

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Interesting but with errors. The advent of teaser rates came far earlier. I was burned in 1984 by one I took in 1982 in Houston. They had 32,000 foreclosures annually for two years. I used one to my advantage in 2000 knowing I could manage it if I was wrong on the direction of rates.

The toxic facillitator of this was the Frannies. Their lobbying took the FHLB's out of the attempt to diversify the market at about 2002-2003. Their bought congressmen block reform pushed every year by this administration and by Larry Summers late in the Clinton years. and more.

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Cheapest loans are the ones that you borrow from your own self therefore they always have to match your expectations and budget.

samlei72

pretty hot stuff....financial crisis in most of the time are man made, if it is man made, therefore it can be controlled, problem is, financial crisis are sometime needed to shift the the axis of power in the market.

cash advance loan

Well, cash advance loan companies offer short term monetary but still, they are part of the economic process. It's established for people with less income or just needs money. Though there's an implemented interest, it still depends on the individual if he or she is willing to accept the terms and conditions. As a consumer, I'm glad that there are lenders who perceive the situation of borrowers.

- Sofia Britts

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People got greedy, that's what happened.

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Banks and other financial institutions have become reluctant to lend to each other. As a result, the money from the banking system stopped flowing to the point where it is most needed.

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Those are major factors said. Reasons why the market got blown up.

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