Cliff Note Version: US financial meltdown



My brother gets a mortgage in the Miramichi. The bank will not go more than 25% of monthly income on mortgage payments and requires mortgage insurance.

He moves to the U.S. as a temporary worker – gets a 40% of monthly income mortgage without even blinking.

Housing prices were inflating and people were using that pseudo-equity to buy, buy, buy. Then the housing market tanked – and housing values fell below the mortgage amount left on the houses.

Banks knew these were risky loans so they bundled the loans into these mortgage-backed securities and sold them on the wider market.

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0 Responses to Cliff Note Version: US financial meltdown

  1. mikel says:

    Not greed-business as usual. Capital goes to where it can build. The problem was lack of regulation, a problem that still exists today. In fact after the housing crisis it immediately moved to create yet another problem in the financial services market, one that may be even worse than the housing crisis.

    It doesn’t help much to say ‘those guys are just greedy’. Corporations, of course, are greedy by definition, as are many companies. However, when you recognize the lack of regulation then it bears looking at. It’s virtually never mentioned since the story broke, but Harper had plans to deregulate meat inspection even further to the point that companies would be doing it themselves. It’s already a joke, but the lack of regulation in ANY industry has real consequences-as many people unfortunately found out.

    But even in the mortgage crisis that’s an interesting comparison.Housing ownership is a huge boon to personal credit, and those bank rules essentially keep people poor and marginalized with no access to credit. So the idea of getting more people into their own homes is a good one-but the lack of regulation meant it was easy for financiers to call in the loans and throw people out for cheaper than it was to keep them there. Government then enabled most of them to write off the losses, and even bailed most of them out. So of course they have no vested interest in working with a homeowner to organize a mortgage payment that worked.

    Ask any homeowner and they’ll tell you that even if it meant paying for 50 years its better than renting, and for a bank the only difference is a couple hundred that could be ‘invested’ elsewhere (there’s that built in greed factor-keep that in mind when the government talks about privatizing government services). I have a retired friend and of course banks won’t touch him with a ten foot pole-he probably won’t LIVE for 25 years and he’s on a pension. His rent just went up again and now he pays just two hundred dollars less a month than we do for a mortgage.

    So its a complex situation that comes down to far more than just one word.

  2. Anonymous says:

    And my soninlaw moves from the states,has to wait two weeks for house sale and 25% down payment on house in NB ,he has to pay the 5000$ insurance,and pays the 25% down in two weeks,but guess what,the insurance of 5000$ is non-refundable.Right there in the small print of one of the crookedest institutions in NB.