Primer On The Financial Crisis

[Schneibster]

How we got here is often a subject of dispute. Here is a pretty good run-down of the moves, step by step:

What caused the crisis? Look:

●Fed Chair Alan Greenspan dropped rates to 1 percent — levels not seen for half a century — and kept them there for an unprecedentedly long period. This caused a spiral in anything priced in dollars (i.e., oil, gold) or credit (i.e., housing) or liquidity driven (i.e., stocks).

●Low rates meant asset managers could no longer get decent yields from municipal bonds or Treasurys. Instead, they turned to high-yield mortgage-backed securities. Nearly all of them failed to do adequate due diligence before buying them, did not understand these instruments or the risk involved. They violated one of the most important rules of investing: Know what you own.

●Fund managers made this error because they relied on the credit ratings agencies — Moody’s, S&P and Fitch. They had placed an AAA rating on these junk securities, claiming they were as safe as U.S. Treasurys.

He goes on from there.

It's a good read. Enjoy.

[Tyrannical]

I can even simplify some of that.


As interest rates fell, would be home buyers could suddenly afford more house. As demand increased, so did prices. Resulting in the housing bubble, which was caused by artificially low interest rates.

The other side of the housing bubble coin was government threats to force banks to loan money to minority (risky) borrowers that defaulted at a much higher rate.

Democrats can't fix that, they are just as willing to take banker lobbyist money but more likely to force banks to make unwise loans. A win / win as long as they have pals to bail them out.

[Svartalf]

depressing

[Schneibster]

The other side of the housing bubble coin was government threats to force banks to loan money to minority (risky) borrowers that defaulted at a much higher rate.

Wrong.

Maybe if you actually read it instead of making stuff up.

[Tyrannical]

The other side of the housing bubble coin was government threats to force banks to loan money to minority (risky) borrowers that defaulted at a much higher rate.

Wrong.

Maybe if you actually read it instead of making stuff up.

Maybe you should read it, unless you honestly don't think interest rates had anything to do with housing prices.
Of course that would make you wrong......

[Schneibster]

The government never threatened anyone to force them to make loans. This is a well-known lie that's been debunked multiple times.