If You Really Want To Understand How The Financial Crisis Happened...
from the listen-here.. dept
In my initial post on the financial crisis, I suggested listening to an older episode of the radio program This American Life, where they described how the mortgage bubble happened, called "The Giant Pool of Money." It's a great way for non-financial types to understand the basic issues involved in the mortgage industry and how things spun out of control. I also mentioned that the guys who did that show have been working on a daily blog/podcast for NPR called Planet Money, which is also fantastic. They also put together yet another show for This American Life this past weekend to explain what happened over the last few weeks and why it is a Really Big Deal, rather than a situation where we should just "let the banks fail." I finally got a chance to listen to it, and it's great. It's called Another Frightening Show About the Economy, and it gets into even greater detail, peeling backing the complicated onion of our financial system, layer by layer, in a way that non-financial types should mostly understand. It is simplified -- no doubt -- but it's by far the best explanation I've heard anywhere. If you're trying to understand concepts like leverage, credit default swaps and the commercial paper market, go take a listen. If you already listen/read Planet Money, there are some repeat clips, as well as some new ones, and the whole show pulls a lot of stuff together from the last couples weeks of Planet Money.
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Filed Under: financial crisis, this american life
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Re:
Clearly, you did not listen to the program.
If you do not realize how this will impact everyday consumers such as yourself, it's pretty silly to comment as you did. And, if you don't understand where those "insane fees" come from, then you are doing yourself a disservice to make such a claim. You are only showing your ignorance.
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Terrifying is an apt word.
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One word sums it up
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Re: One word sums it up
Actually, if you listen to the shows, I'd argue that's not the word that sums it up at all. The word that sums it up is *incentives*. If you blame greed for the problems then you're not going to find a real solution. If you understand the incentives, you might.
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Interesting reading, to say the least.
Yes, READ the first one. Can't stand watching video on a computer.
Now, for my input. Once again, another discussion topic covers what happened, but not why it happened. No where does it explain why false mortgage information was being created. No where does it explain why no one on Wall St took measures to ensure these loans were legit. No one explains why there was an increase in ARMs.
My first inclination was to say greed, but I know better. I've been in this world of mortgages and I know how bankers think when signing up a new customer. They never intend to keep the loan, so they'll do whatever the hell they can to reap the instant "gratification" of making and selling the loan.
As the topic discusses quite clearly, do this enough and there is quite a bit of money to make. So how is it the ARMs increased?
I've challenged the credit card industry helped and I stand by this. While there were some devious SOBs out there who took advantage of an unregulated process, there were legitimate buyers who were told their credit wasn't sufficient enough for a fixed mortgage rate.
This whole "hiding" of information is bullshit. Hiding isn't what happened, but turning a blind eye. No one wanted to know these loans were bad, especially given the explosion of incoming loans. Did Wall St really think the explosive increase of mortgage loans wasn't a tell-tale sign something was wrong? Right.
But I digress. It's pointless to point fingers now. The damage is done and we're all paying for it. We'll be paying for it for years.
Personally, I think everyone should just quit paying their bills altogether. Really add to the fiasco. What are they going to do, take your house and car? Please, they'll be out of money so damn fast, they'll give up.
I also think everyone should make a bank run. Take out your money. It's yours. Not theirs. Use it to buy the groceries you need to live.
I love watching the Dow fall like this. It's a reminder businesses are closing their doors for good because lenders are treating them all as idiots who can't pay their bills (sound familiar?).
It means Mom & Pop can't retire now because they've got nothing to retire on. It means our 401k savings amount to nothing more than a piggy bank instead of a retirement account.
This is a perfect opportunity for the masses who do what they're supposed to do a chance to fight back, even knowing they won't. They'll continue paying their bills on time while their children struggle to get financial aid for college (which should be free anyway).
We live in a world where the express "Give a fish to a man, he eats for a day. Teach him to fish, and he eats for a lifetime." translates to "Overprice and sell a man a fish so he can eat for a day. But dominate the oceans such that you can charge him for lessons on fishing, charge him for fishing in the ocean, charge him for the boat and supplies he'll need, and make sure you do all this such that the man never has a chance to financially overtake you."
Let the banks fail.
And to see this hit globally: priceless.
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It didn't start with GWB (although he did nothing to stop it) and it wasn't caused by Barney Frank (although he also didn't stop it) but goes all the way back to the Jimmy Carter era.
Mortgage records were reviewed and someone said "hey, minorities are being discriminated against because they are not getting their share of mortgages." Banks said, hey, we don't look at their color, just the credit standards. Banks that didn't loosen up their standards were punished by the govt.
Of course, they started opening it up to minorities (read, bad credit risks).
That was bad. What happened next was worse. Of course, real estate developers and investors started to get these same loans. You can't offer a loan to some and not others (that would be discrimination) so they jumped on the band wagon. Personally, I would love to see how many people in single residences (not investment property) will face foreclosure vs. investors, but that's a different question.
Who is at fault? The democrats, who pushed for more home ownership. The republicans, they liked the money going into the system. The banks, they loved the profits. Everything was fine until the market switched. Lets not leave out the consumers that received these loans. They saw cheap money and they jumped at it. Didn't they know they couldn't actually afford that house? Where is the personal responsibility? My friend received an ARM for a renovation about 3 years ago. I asked him why he would go for an ARM when mortgage rates (and home equity rates) were at pretty much at historical low rates? His answer? It was cheaper. Of course, now it isn't.
Is that the banks fault? This guy isn't stupid, he is a senior Corps. of Engineer employee. He is responsible for some of the levee's around here (of course, if I lived in New Orleans, I might question his intelligence, but ours hold) so he isn't dumb. The bankers, are they dumb? Is Wall Street dumb? They knew the risks and they took them. They all did. Everyone involved knew the risks, they ignored them, and now the taxpayer has to pay for it.
The sad thing is, the taxpayers are the ones left standing while everyone else has a chair.
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But Wait
Must be they don't understand technology or something...
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I stopped reading at "non-financial" types.
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NPR hates out Freedoms!
VOTE McCain 2008 - He'll get rid of Ira Glass and the rest of those commie spoutin hippies!
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