(August 24, 2015 at 8:40 am)Rhythm Wrote: Didn't have much to do with people taking out loans they couldn't afford either, far as I know (though that's a great way to shift the blame and I'm sure that a faction of those involved would very much like for people to believe it to be so). Say it with me......"exotic financial instruments".
Was it not the case that a rise in the number of foreclosures caused the crash?
Excerpts from the Wikipedia entry:
Quote:[...]Increased foreclosure rates in 2006–2007 among U.S. homeowners led to a crisis in August 2008 for the subprime, Alt-A, collateralized debt obligation (CDO), mortgage, credit, hedge fund, and foreign bank markets.
[...]The mortgage and credit crisis was caused by the inability of a large number of home owners to pay their mortgages as their low introductory-rate mortgages reverted to regular interest rates.[...]
[...]Claims that there was no warning of the crisis were further repudiated in an August 2008 article in The New York Times, which reported that in mid-2004 Richard F. Syron, the CEO of Freddie Mac, received a memo from David Andrukonis, the company's former chief risk officer, warning him that Freddie Mac was financing risk-laden loans that threatened Freddie Mac's financial stability. In his memo, Mr. Andrukonis wrote that these loans "would likely pose an enormous financial and reputational risk to the company and the country".[...]
I'm no economics whiz, at all, and may well be misunderstanding the cause of the crisis ... but it seems to me that "insurance" hedges that were paid out on foreclosures induced a crisis in capital, which is why banks are now required to set aside more reserve against obligations.
