I can't help but wonder what happens next. Home-ownership used to be a foundation of success in America. Many people bought into it while being unable to afford it. Banks took advantage of that, and Wall Street diffused these bad loans into every facet of the economy. I'm oversimplifying tenfold, of course, but correct me if I'm wrong. Do you think we're seeing a shift in American psychology, a shift towards thrift (as in the Depression era)? And if that's the case, how do we spend ourselves out of a second slump?
This isn't the only thing, it didn't start the housing bubble. The housing bubble was there. But in the banks management of mortgages and leveraging, they took very very high risks that they knew were very very high risks. Should the system bust, you're screwed because you leveraged too high. And bust it did. And that feedback fed right into the system and all of a sudden banks were looking and a meltdown which required the tax payers to bail them out.
While individuals most certainly need to be more responsible with their contract, there is no denying the sort of predatory loans which were occurring at the time. Get the mortgage, sell it off in a package somewhere else. Where does it go? No one knows (which was why the banks foreclosing on houses they couldn't prove they owned turned out to be such a huge scandal). Nothing is quite so simple in reality and there are various factors. But certainly deregulation played a major role in the magnitude of collapse.
You know the time is right to take control, we gotta take offense against the status quo
Originally Posted by A. de Tocqueville
I don't think whatever you refer to as a "massive bleed of jobs" had hardly any effect. This wasn't caused by a cyclical hiccup or by the elimination of certain domestic jobs. This was caused by large-scale consumer ignorance. The buck stops there. Nowhere else.Originally Posted by liblady
And people walk out of their mortgages because of what we've been discussing - when they realize 6 months afterward that they obviously bit off more than they can chew.
Hey, if you want to subsidize the average American's ignorance, that's fine. Write 'em a check. Don't sit there and cry foul and point fingers where they don't need pointed.
Subprime mortgage crisis - Wikipedia, the free encyclopedia
The immediate cause or trigger of the crisis was the bursting of the United States housing bubble which peaked in approximately 2005–2006. High default rates on "subprime" and adjustable rate mortgages (ARM), began to increase quickly thereafter. An increase in loan incentives such as easy initial terms and a long-term trend of rising housing prices had encouraged borrowers to assume difficult mortgages in the belief they would be able to quickly refinance at more favorable terms. Additionally, the economic incentives provided to the originators of subprime mortgages, along with outright fraud, increased the number of subprime mortgages provided to consumers who would have otherwise qualified for conforming loans. However, once interest rates began to rise and housing prices started to drop moderately in 2006–2007 in many parts of the U.S., refinancing became more difficult. Defaults and foreclosure activity increased dramatically as easy initial terms expired, home prices failed to go up as anticipated, and ARM interest rates reset higher. Falling prices also resulted in 23% of U.S. homes worth less than the mortgage loan by September 2010, providing a financial incentive for borrowers to enter foreclosure. The ongoing foreclosure epidemic, of which subprime loans are one part, that began in late 2006 in the U.S. continues to be a key factor in the global economic crisis, because it drains wealth from consumers and erodes the financial strength of banking institutions.
Treat the earth well: it was not given to you by your parents, it was loaned to you by your children. We do not inherit the Earth from our Ancestors, we borrow it from our Children. ~ Ancient American Indian Proverb
"A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly. But the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself. For the traitor appears not a traitor; he speaks in accents familiar to his victims, and he wears their face and their arguments, he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist. A murder is less to fear"
Cicero Marcus Tullius