There are amongst us people who feel that the people who borrowed money to live in houses they had no right to live in simply because their income was not sufficient to repay their mortgage.
There are even amongst us who believe that these people are directly responsible for the current financial collapse.
I thought that perhaps this long but meticulously researched article written by an ex Wall street insider would help clarify who is the actual perpetrator causing the financial and economic demise of the entire global community. One hint; it’s not those poor saps who thought their lucky day had come when they finally lived in a house they loved with the expectation that house prices would continue to rise and they couldn’t loose.
The Second Great Bank Depression has spawned so many lies, it’s hard to keep track of which is the biggest. Possibly the most irksome class of lies, usually spouted by Wall Street hacks and conservative pundits, is that we’re all victims to a bunch of poor people who bought McMansions, or at least homes they had no business living in. If that was really what this crisis was all about, we could have solved it much more cheaply in a couple of days in late 2008, by simply providing borrowers with additional capital to reduce their loan principals. It would have cost about 3 percent of what the entire bailout wound up costing, with comparatively similar risk.
Just as great oaks from little acorns grow, so, too, can a Second Great Bank Depression from a tiny loan grow. But so you know, it wasn’t the tiny loan’s fault. It was everyone and everything that piled on top. That’s how a small loan in Stockton, California, can be linked to a worldwide economic collapse all the way to Iceland, through a plethora of shady financial techniques and overzealous sales pitches.
Here are some numbers for you. There were approximately $1.4 trillion worth of subprime loans outstanding in the United States by the end of 2007. By May 2009, there were foreclosure filings against approximately 5.1 million properties. If it was only the subprime market’s fault, 1.4 trillion would have covered the entire problem, right?