How did the credit crisis happen?

Because Democrats were busy CAUSING the credit crisis by insisting that banks give mortgages to people who had no way of paying them. Democrats call this "compassion". I call it abuse.

My answer is going to be long. Will you read it?

The world savings in 2001 was 36 trillion. The world savings now is 70 trillion. This is a figure from the International Monetary Fund.

Where did all this extra wealth come from? Well societies did better. Abu Dhabi and China for example moved up in wealth.

So what happened here was more money chasing the same amount of sound investments. They craved more investments for all this new savings.

What looked attractive was mortgage backed bundled securities. The mortgage industry grew. Loans were given to qualified applicants and these loans were bundled by the 1000s and sold to investors. After all qualified applicants were basically tapped out, lending practices begin to loosen. It eventually went into a NINA loan. No income no asset. Mortgage companies still profitted because they would just turn around and bundle these mortgages to sell to investors.

So why did all these people put money into mortgage securities?

They were rated by bond agencies like Standard and Poore's as AAA which meant as good as money basically. They were perceived to be safe.

This is the mortgage side of it.. the other involved credit default swaps (bond insurance) and derivatives.

Now doesn't your partisan crap look weak now?

Damn dude.. there was nothing partisan in that above explanation whatsoever. I was saying YOURS was partisan crap.

It agree that the credit crunch has been used as a method to gain consent to push forward a conservative economic agenda. This is to do with the fact that big bussiness is calling the shots in the world. The rapidity is due to the fact that people are willing to allow these changes and mergers at a quicker pace because of the sense of economic emergency. Of course in a time of stability this is much more of a creeping process. However as with the credit crunch and the buying up of major firms and increasing costs. The increase in security is related to the sense of crises for western civilisation created by 9/11. The state and bussinesses are powerful forces in society and will always siez oppurtunities to press their agenda.

The credit crisis actually goes back to the Carter administration and the S&L crisis of the '80s. The rough time line goes something like this:

Late '70s/early '80s - the government decides to try and reign in stagflation, a problem that itself was caused by failed government policies. They go from artificially low interest rates to artificially high ones and successfully choke the economy further. Carter gets booted out of office and replaced by Ronald Reagan for his miserable stewardship of the economy.

1980s - S&L crisis. Banks fail. The stock market tumbles in the late '80s.

Late '80s, early '90s - Upon the recovery of the stock market, the government and lending institutions seem to forget how much things sucked when they made stupid decisions. The deregulation of the financial industry begins at the behest of Republicans. Democrats successfully push through legislation that insures loans to minorities for a perceived discriminatory practice among lenders to only lend money to whites. While it's true that there was some discrimination, what the Democrats fail to realize is that the reason that most of these people were being denied credit had more to do with the fact that they were either unemployed or underemployed and had never paid a bill in their life. Banks lent to them anyway, because if they defaulted, they could get their money from the government. Sure bet!

Late '90s, early 2000s - having made a killing lending money to minorities with crappy credit, banks decide that they should start lending money to white people with crappy credit. Thanks to the Republican-backed deregulation of the mortgage industry and a complete lack of oversight on, well, ANYTHING, banks start issuing loans with confusing terms and fluctuating interest rates to people who were just glad to buy a home and didn't really concern themselves with how they'd pay their mortgage when the payment tripled after the teaser rate expired. Oh, and they decided that people with good credit could use their home like an ATM through home equity lines, just so everybody could get in the high debt fun.

Present day - because the loans to minorities with crappy credit were made in smaller numbers, when they defaulted, it wasn't in waves and it didn't cause a crisis. But now, thanks to artificially low interest rates, a glut on the housing market has led to tumbling home prices, which means that many people with crappy credit owed way more on their homes than they were worth. Teaser rates start to expire, and, who would've guessed, the people who were deadbeats all their life couldn't make the higher monthly payments. All of a sudden, lots and lots of people started to default on their mortgages. And in addition to a lot of people with no homes, you find that banks are starting to take a hit too, because the outstanding balance on the loan is significantly more than what the current housing market values the home at. Mortgage companies start to flounder, and the securitized debt from these mortgages becomes almost worthless. All of a sudden, the other financial institutions on Wall Street start to hurt, and it leads to a cascade effect. Everybody with a connection to mortgage industry is hurting or going out of business, which means that lending institutions have to shore up their cash reserves to survive - which means lending less, which means that credit is harder to come by. This further chokes off individuals and businesses that have come to rely on credit instead of good old fashioned savings to run.

The problem was caused by pretty much everybody in America. The Democrats for encouraging lending institutions to make irresponsible loans to individuals with risky credit, the Republicans for deregulating the industry without putting in any kind of oversight, predatory lending institutions for writing bad loans, other Wall Street firms for buying so much mortgage related debt, and Americans who didn't know how to say "no" to more house and debt than they could possibly afford.

You average citizen has to take their fair share of the blame too. Many people got into houses bigger than they could afford, living beyond their means, charging their credit cards up to an amount they couldnt afford. Now many people are in their houses upside down, letting them foreclose and figuring they will just buy again. People are not responsible with their money.

There is no independence so important and no dignity as impressive as living within your means.

because the democrats didnt want people's feelings to be hurt when they got denied for a house.

they want everything to be fair (communist), as Biden's debate clearly showed the other day.

+ the democrats were making huuugee bank for keeping their mouths shut.

Obama has gotten a ton of funding for his campaign by Fannie Mae.

If you think it's bad now, the Obama Democrat hand outs have only just begun.

Free houses, free cars, free trips to Cuba.

Greedy banks - practicing deceptive predatory lending - in order to fatten their swine-ish wallets...

If anyone truly understands what a "derivative" is, they will understand.

Obama/Biden 08, 12.

Deregulation and no oversight. Republican ideas - they'll fail you every time.