There's a lot of misunderstanding out there about what got the US economy into trouble, particularly among politicians (who I can only assume are either willfully ignorant or purposefully trying to mislead the public).

 

The source of the problem is the housing bubble, which is now burst. Over the past decade, home prices have risen faster than inflation. The reason for this is because it was easy to get a home-loan, regardless of your credit or income. Politicians are saying there was a "lack of regulation," which would have stopped these lenders from being too "greedy". That's hogwash.

 

The reason banks made so many bad loans has to do with the "Community Reinvestment Act" (aka CRA), which was a law passed in 1977 and changed in 1995. This law required banks to take on more risk than they normally would by offering loans to people with lower incomes and bad credit:

 

The CRA was passed into law by the 95th United States Congress in 1977 as a result of national grassroots pressure for affordable housing, and despite considerable opposition from the mainstream banking community.

 

So those "greedy" banks were against this from the start. It was the government's insistence that they give loans to people who couldn't pay them back, all in the name of "affordable housing".

 

Then in 1995, a revision was passed that changed the CRA's requirements for banks to include a certain number of loans targeted to particular races and neighborhoods. That caused the number of "subprime" (risky) loans to increase 39% between 1993 and 1998, while other good loans only increased 17%.

 

The Democrats are mostly responsible for this mess, although Republicans share a big part of the blame for not doing more to fight it and see it coming. Also, many Republicans are going along with this $700 billion bailout even though they are receiving thousands of phone calls from their constituents asking them not to. The bailout will do nothing to alleviate the root of the problem, the CRA, and it will burden taxpayers for another generation with trillions in added debt.

 

In conclusion: Government sucks. Economics always wins in the end.

In conclusion: It's down to dodgy Americans being forced to lend money to people they know wouldn't repay.

Well whatever way you look at it, greed has still played a major part in all this.

;)

Of course it has ;)

In conclusion: It's down to dodgy Americans being forced to lend money to people they know wouldn't repay.

Haha, yep. That's how I finally got it!

Well whatever way you look at it, greed has still played a major part in all this.

;)

 

Greed is in human nature, and we should all be so fortunate that it is! Capitalism harnesses greed for the good of society. It's only when the government interferes that greed becomes unhinged - in this case it was the greed of the mortgage lenders and the borrowers equally.

 

http://www.youtube.com/watch?v=RWsx1X8PV_A

There are so many to blame for this mess. The borrowers, the lenders and the government(both parties)

There are so many to blame for this mess. The borrowers, the lenders and the government(both parties)

 

You can distill the blame:

 

The Democrats, who passed the Community Reinvestment Act under the guise of helping the poor.

Republicans are to blame too.

 

The bail out won't fix a thing, it may give the market a surge in the short term(few months) but in the end the problem will still be there. So the bail out is a waste of money.

wow ,hundreds of accredited economists say you cannot pin this mess down to one a single problem, but i see you can! You should let them know that you have figured the whole thing out!

wow ,hundreds of accredited economists say you cannot pin this mess down to one a single problem, but i see you can! You should let them know that you have figured the whole thing out!

 

Where did they say that? The only thing hundreds of economists agree on is that this bailout isn't going to work. The root of the problem is crystal clear.

 

The question for the American people should be: If economists know it won't work, and American public opinion is overwhelmingly against it... why are both political parties working overtime to make sure it happens?

Well, we're being told the world would go into a depression, with the US leading the way down, if we don't have the bail out. Perhaps this is true the way the markets got rigged. Personally, I see the problem is systemically the result of poor checks and balances on the elections and campaign process, which allows excess corruption & kickbacks, which then allows certain bad ideas to become law to favor a particular special interest group penning the legislation. The profit motive is a good one - I agree - but unregulated or poorly/wrongheadedly regulated lending practices, which are not for the best interests of the nation or world as a whole, are where the faults damages the process. The questions we need to ask, in any mystery, is where is the motive? Or, is it just the result of gross incompetence?

National Grassroots Pressure led to the CRA?? Hmm.. well then, maybe there was a good measure of gross incompetence involved! But it may be more than this - I did watch a special on the changes in people's lives today, and it's a little more complicated, including how a number of factors are squeezing people into making poor choices, which when taken as a whole, explains a lot more as to why there's so much default in our economy today.

Well, we're being told the world would go into a depression, with the US leading the way down, if we don't have the bail out. Perhaps this is true the way the markets got rigged. Personally, I see the problem is systemically the result of poor checks and balances on the elections and campaign process, which allows excess corruption & kickbacks, which then allows certain bad ideas to become law to favor a particular special interest group penning the legislation. The profit motive is a good one - I agree - but unregulated or poorly/wrongheadedly regulated lending practices, which are not for the best interests of the nation or world as a whole, are where the faults damages the process. The questions we need to ask, in any mystery, is where is the motive? Or, is it just the result of gross incompetence?

 

It was probably dreamed up as another way of controlling the population through the back door.

By taking advantage of people's greedy natures and encouraging them to borrow money to buy things they can't actually afford (including property), you have them on a treadmill which consumes all their time and energy with no hope of escape.

The public have been brainwashed for decades in the same way the media cons them into believing image, fame and wealth are the most important things in life.

Well now the financial bubble has well and truly burst, and it's time for a major reality check !!;)

.

My bank Washington Mutual just got bought out by JP Morgan

Washington Mutual's capital structure was blown to bits when the federal government came in and seized the assets and then sold them to JP Morgan for a song.

 

Nobody can invest in America now without first considering whether their money will be taken from them. This is a trust issue, and the government is the enemy.

 

By taking advantage of people's greedy natures and encouraging them to borrow money to buy things they can't actually afford (including property), you have them on a treadmill which consumes all their time and energy with no hope of escape.

 

Eh, you might be right but I'm not willing to give politicians that much credit. Honestly I think they're just lacking in the brainpower department (and they've probably never taken an economics course in their life).

 

American culture is definitely to blame, though. We've been taught that renting is for lazy-ass college students and goobers who don't want to invest in a home. We were told that buying a home is a "sure bet" that will grow your money. A safe investment.

 

Anytime someone says a whole class of investments is without risk (even if it is a home), they are LYING to you. The lesson here to Americans is: use your brain, research every investment you make, don't buy what you clearly can't afford.

^thanks for info

 

Eh, you might be right but I'm not willing to give politicians that much credit. Honestly I think they're just lacking in the brainpower department (and they've probably never taken an economics course in their life).

 

However, it's the people "operating" the politicians you should be concerned about. The men in grey suits behind the scenes.;)

 

American culture is definitely to blame, though. We've been taught that renting is for lazy-ass college students and goobers who don't want to invest in a home. We were told that buying a home is a "sure bet" that will grow your money. A safe investment.

 

Anytime someone says a whole class of investments is without risk (even if it is a home), they are LYING to you. The lesson here to Americans is: use your brain, research every investment you make, don't buy what you clearly can't afford.

 

True. People seem to forget the old adage "if it looks (or sounds) too good to be true, it probably is."

The problem is that people have got far too used to having anything they want, irrespective of whether they can really afford it.

Not everyone can afford to have their own home, and far too many people buy one which is far bigger than they actually need.

Maybe people should be taught how to live within their means, as a great many obviously have no idea how to do this.;)

132 Republicans and 94 Democrats in the House have just saved the American taxpayer from a bailout bill that is:

 

a. It is immoral—Dumping bad debt on the innocent taxpayers is an act of theft and is wrong.

 

b. It is unconstitutional—There is no constitutional authority to use government power to serve special interests.

 

c. It is bad economic policy—By refusing to address the monetary system while continuing to place the burdens of the bailout on the dollar, we can be certain that in time, we will be faced with another, more severe crisis when the market figures out that there is no magic government bailout or regulation that can make a fraudulent monetary system work.

 

 

Hooray! for those politicians who actually listen to their constituents.

Good! It got stopped. Maybe one aspect not being discussed is why politicians try to buy votes on such short-term thinking (by loosening the rules too much). I almost think they would act more rationally if their terms were longer, and there were strict term limits. Make both the house and senate 6-year terms, but limit them to perhaps two terms? It's the same thing with Social Security - the politicians kept taking from the funds to balance the budget so they could get re-elected. I think they knew better, but this was the game they were playing to hold on to their seats, and to be able to tell their constituents that they balanced the budget (with taboo funds from a "secure" retirement system).?

132 Republicans and 94 Democrats in the House have just saved the American taxpayer from a bailout bill that is:

 

a. It is immoral—Dumping bad debt on the innocent taxpayers is an act of theft and is wrong.

 

b. It is unconstitutional—There is no constitutional authority to use government power to serve special interests.

 

c. It is bad economic policy—By refusing to address the monetary system while continuing to place the burdens of the bailout on the dollar, we can be certain that in time, we will be faced with another, more severe crisis when the market figures out that there is no magic government bailout or regulation that can make a fraudulent monetary system work.

 

 

Hooray! for those politicians who actually listen to their constituents.

 

Does this mean there'll now be a "run" on the banks, then??:stunned:

The $700 billion dollar bailout bill did not pass.

Good

i hope none of you folks have 401k's because those are about to go *poof*

 

who really wants to retire anyway?

 

 

 

 

The sad thing here is that 1 trillion dollars for this war in Iraq is considered acceptable. We tax payers pay for that as well, just so you all know.