OK...for all of you who embrace a liberal thought process.
How did we get in this financial shape?
1) Clinton and then Bush set up as policy that Freddie and Fannie focus on bringing up home ownership for Blacks and Latino's. Where 87% of White Americans own homes only 67% of Black Americans and 50% of Latino's do.
So, to increase home ownership loan standards were reduced. You did not need to have so much down to qualify and ARMs were introduced to allow you to get into a home at a much lower rate with the assumption that as your income grew over a 5 yr. period you would be in a postion to pay for the house.
So...we had a ton of people that should have never gotten a loan...given one.
Who was in charge of Freddie and Fannie? Look it up - Ex- Clinton and Mondale people who pushed this "home loans to the poor" idea. (Reid, Gorelick, Jackson)
Typical liberal idea that looks good but in the end leads to disaster.
Who prevented it from being reformed? Look it up - Rangle, Shumer.
Who wanted Freddie and Fannie to INCREASE their loan sizes - Pelosi
Who got the 2nd MOST MONEY from Freddie and Fannie lobbyist- OBAMA
2) These loans were then collateralized (packaged) and sold to various institutions as investments. With the reduction of requirements also up sprang a bunch of just "Loan originators" that did not really care who they were loaning to as they would just turn the loans around.
So..once the people defaulted, the investment packages were worth less (or worthless) which forces the banks to recollaterialize, force them to sell some of the assets. This forces the marketdown, which reduces the asset value and you get "The domino" effect.
And it was all based on the idea that poor people that could not afford loans should get one anyways.
