Do you think the unsecured loans was the primary cause of financial crisis in 2008?
The primary cause of the financial crisis was 3 pronged. It was the government sponsered enterprises like Fannie and Freddie buying up large supplies of the CMO markets in order to create artificial demaned for these products. The more they bought...the more were issued. Banks stopped caring about the credit quality and the securing of loans when they could simply sell them off. And as long as the gov't was there to buy up the loans the risk would be transferred off of their balance sheets. Except certain congressmen were running defense for the GSE's and hiding the fact they they were bankrupt while their books were being cooked. They stonewalled inquiry after inquiry. When they collapsed, the banks were left holding all this lousy paper that the gov't was asking them to write for years. The gov't attempting to socially engineer the system to ensure everyone could own a home was the single biggest cause.
The second prong was the upsurd requirments placed on banks via the CRA act which has become more and more aggressive over the years. The forced diversity in loan portfolios is inherently irresponsible underwriting. The only factor that should determine loan approval is ones financial profile. Not socially engineering bank loans via zip code. Another ridiculous gov't manadate.
The third was the Fed holding rates too low for too long. More than likely we are beginning to repeat the same mistake all over again.
At the end of the day...banks don't like to loan money to people that can't pay them back. If the gov't subsidizes the financial markets and transfers the risk to the tax payer as they have done, market dislocations will continue to occur. If banks are allowed to loan money based on credit ratings and evaluting the borrowers ability to repay the loan, without the gov't attempting to socialize th system, we'd all be better off. Unfortunately, little has been to stop this behavior. The gov't still places all the wrong incentives in all the wrong places.
by Gary Anderson 9 years ago
The consumer is the catalyst of our economy. The consumer is tapped out by bad loans, too much credit, by a greedy banking system that wanted profits before responsibility. Option arm loans, credit card loans, and other debt will put a dangerous strain upon the economy through 2011 at least. Even...
by Moderndayslave 7 years ago
With the Gramm, Leach, Bliley Act effectively pulling the teeth from Glass Steagall and the Commodities Futures Modernization Act of 2000 opening the casino doors for Wall St. Did senator Phill Gramm and Congress effectively set up America for the financial looting we are enduring...
by LoliHey 9 months ago
Do you believe that a financial crisis is coming in the near future?Global Currency Reset. The collapse of the dollar. A severe stock market crash twice as bad as 1929. I'm hearing from so many that it is a certainty. Do you expect one to take place soon?
by Dr. Zia Ahmed 6 years ago
Do you think next financial crisis can be avoided?American Debt is going up. Europe is in finacial mess and Commodities are high. There is no currency that can be trusted as reserve currency. The reckless practices of Bankers are still as it is, no change in risk taking. Rating agencies and...
by Shawn McIntyre 5 years ago
The following question was asked on one of my articles (Economics For Beginners: The Subprime Mortgage Crisis). It's a great question, and one deserving of an answer, but an article designed for beginners simply wasn't the place. So I've invited Freeway Flyer here to the forums for a more...
by Knowing Truth 6 years ago
Do you agree the next global financial crisis is caused by Europe?Early October 2011, Dexia became the first European bank to fall victim to the Eurozone sovereign debt crisis and it was subsequently bailout by the Belgian and France governments. That how the Global Financial crisis of 2008...
|HubPages Device ID|
|Login||This is necessary to sign in to the HubPages Service.|
|HubPages Google Analytics|
|HubPages Traffic Pixel|
|Google Hosted Libraries|
|Google AdSense Host API|
|Conversion Tracking Pixels|
|Author Google Analytics|
|Amazon Tracking Pixel|