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Originally Posted by Chaotic  What does this mean for the average person? Is this something I should be worried about? I was about to buy a car, should I not? etc. |
Everyone who lives in this country will end taking responsibility for this one way or another. Either we take it in the form of bailouts or we take it in the form a crippled and barely existing financial credit system. Which cripples businesses' ability to expand and hampers consumer spending. Two of the biggest pillars of the U.S. Economy.
What brought this to a head was when bad mortgages collided with a severe down turn on housing prices. Suddenly all those bad mortgages that the bank thought was such a great deal because they were going to get a house on the cheap, keep the interest payments already made by the defaulting party, AND get to resell the house and probably give the new owners their mortgage just got butt-fucked. Now a house that was worth $200k with a mortgage principle of $180k is worth $150k. And the loan companies panicked.
All those loans were considered assets that banks/mortgage companies used to leverage other financial transactions. Including student loans, savings account interest rates, business loans, and other financial investments.
This, in turn, created a huge web of financial dependencies that ended up tracking right back to these bad loans.
The financial markets were so saturated with these types of loans, and they were allowed to fester for so long, that they have infected every single aspect of the American financial industry. This includes credit cards, hedge funds, 401k's, mutual funds, money market accounts, and pretty much any other financial credit practice and investment strategy you can think of.
