Are you confused about mortgages? Good. At least you know you are confused. The global economic system has been collapsed by people who were confused about mortgages and didn’t know it. Whose fault was it? It was the fault of the sub-prime home buyer. It was the fault of the sub-prime mortgage broker. It was the fault of lazy financial advisors who put their client’s money in asset backed paper that turned out to be worth whatever recycled paper goes for and no more. Of these, the most dangerous and most responsible party, the Federal Reserve Bank, is also the malefactor fingered the least. I’ve found an article about geld lenen.
The Federal Reserve increased the amount a bank could loan relative to the amount the bank holds in deposits. It is hard to argue that the increase to a 30-1 ratio was simple idiocy. Jon Stewart repeatedly hammered this point home when demolishing Mad Money host Jim Cramer on March 12th. Why is Republican Congressman Ron Paul the only politician in Washington pointing at the Federal Reserve Bank? Why are heads not rolling and careers ending at Treasury?. Congress must replace the FRB.
Mortgage brokers concocted obtuse mortgage contracts and then began shilling subprime loans to unqualified buyers. Millions who trusted their financial advisors had no idea there money was getting tied up in mortgages to unqualified people.
When the FRB raised the ratio it flooded the market with more money, which went out in loans to unqualified buyers which were then bundled as the infamous ‘asset backed paper.’. An other word for a so called toxic asses is a liability. And that’s what the governement is buying. The government is effectively using your money to buy these liabilities named toxic assets.
What will happen going forward? People who can’t afford things will not buy them. And people who can afford something will save to buy it instead of putting it on the credit card. I cannot conceive of people so clueless that they make the largest financial commitment of their lifetimes without reading the document they are signing – or at least paying a lawyer or advisor to do so. Pity them, yes. Bail them out? Not a chance.