- Joined
- Mar 27, 2009
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- 11,963
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- Location
- Naperville, IL
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- Political Leaning
- Moderate
To answer the thread question...
After the Bush tax cuts for the wealthy, the markets were flooded with new money... Demand kicked in and Wall Street invented new ways to invest. Mortgage backed securities, derivatives..all kinds of new products with complicated payout schemes thought up by a group of maybe 100 people. (some of whom should be in jail)
Unfortunately, the underfunded, understaffed SEC and other consumer protection agencies didn't have a clue and it was the 1980's all over again...
But mortgage backed securities need what? Mortgages! So the Morgage brokerage houses grew and grew, the brokers set out to lend money to as many people as possible, collect their fees, then be their way. Nevermind that the people didn't have the monthly income to qualify for the loan. Just hide that fact way, way down in the contract, get them the loan and collect your fees. It's not your money anyway. Then the banks packaged the crap loans and sold them to the investors.
Moral of the story. Bubbles always burst because their filled with nothing but air.
After the Bush tax cuts for the wealthy, the markets were flooded with new money... Demand kicked in and Wall Street invented new ways to invest. Mortgage backed securities, derivatives..all kinds of new products with complicated payout schemes thought up by a group of maybe 100 people. (some of whom should be in jail)
Unfortunately, the underfunded, understaffed SEC and other consumer protection agencies didn't have a clue and it was the 1980's all over again...
But mortgage backed securities need what? Mortgages! So the Morgage brokerage houses grew and grew, the brokers set out to lend money to as many people as possible, collect their fees, then be their way. Nevermind that the people didn't have the monthly income to qualify for the loan. Just hide that fact way, way down in the contract, get them the loan and collect your fees. It's not your money anyway. Then the banks packaged the crap loans and sold them to the investors.
Moral of the story. Bubbles always burst because their filled with nothing but air.
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