The real reason for the American recession?

I think your theory can work if it happens on large scale (nation wide scale).

But, the fact that caused the recession started from the Housing Loans nationwide which turned bad. This housing loans were made so easy to obtained in the first place. But, unfortunately, not fiable.

I agree with what you say, at least in part, but what the claims are that many had balloon mortgages that increased after a few years. The economy was going good and the borrowers thought they would be making more money when their payments got high.

Also a lot of people were "flipping" homes... this means they owned more than one home and it was an investment since housing was going up... they would buy then turn around and sell to make a profit. Many got stuck with these homes when the bottom fell out of the housing market and they couldn't pay "both" house payments.

The Mark, above, is also right... it can simply be blamed on Barney Frank and his buddies in congress. This is the same guy that had a gay prostitution ring operating from his house and claimed he didn't know about it... so don't hold your breath for him to take the blame. He obviously will say he didn't know a thing about what was happening.

In a nutshell, the federal government (over the last 20 years) pushed the mortgage industry so hard to get minority homeownership up, that it undermined the country's financial foundation to achieve its goal. Further, this social activism endangered the entire mortgage enterprise.

All you have to do is track down reports and articles back to the 1990s, when the United States experienced a sudden surge in homeownership among minorities:

• An article in the Los Angeles Times from the late 1990s praised the surge, calling it "one of the hidden success stories of the Clinton era."

• But researchers claim that the success came at a great price; the Federal Reserve Bank of Boston even produced a manual warning mortgage lenders to no longer deny urban and lower-income minority applicants on such "outdated" criteria as credit history, down payment or employment income.

• My contention that lenders were under pressure to loosen their standards for racial and political goals is confirmed by the fact that Fannie and Freddie encouraged and praised lenders for adopting the slackened policies toward minority applicants.

• A New York Times article from September 1999 states that Fannie had been under increasing pressure from the Clinton administration to expand mortgage loans among low- and moderate-income people and that the corporation loosened its lending requirements to comply.

• The Washington Post reported that a higher percentage of African Americans with incomes of $65,000 to $75,000 had worse credit than white Americans with incomes of below $25,000.

Such data demonstrates that when federal regulators demand parity between racial groups in lending, the only way to achieve a quota would be to begin making intentionally bad lending decisions. Furthermore, the risk is too high to sacrifice sound financial policy for social activism.

We can now see the results of these policies, which almost collapsed the world's entire financial system. The sad thing is, most of the world were doing the same exact thing.

Here's what I decided, from months of reading the Wall Street Journal.

[1] The primary cause is bad government regulation. The Democrats screwed us by forcing bankers to sell mortgages to people that didn't qualify for them, under the aegis of "increasing home ownership". See the "Community Reinvestment Act". The Republicans screwed us by deregulating to the point of chaos; that left no one minding the store, so to speak.

[2] The secondary cause was corruption in the credit-ratings agencies. Somehow, RMBSes (residential mortgage-backed securities) made from subprime loans got AAA ratings. Bond issuers basically told the ratings agencies to give them the ratings they wanted or they'd take their business elsewhere. The ratings agencies gave in.

[3] The tertiary reason was people buying houses with no-money-down mortgages. When their mortgage went underwater (i.e. when they owed more than the house was worth), they had no down payment to lose, so they walked away. This leaves the banks with lots of nonperforming loans.

I agree. No job, no mortgage payment. Almost all of the manufacturing has left this country..... products that have a long history: and are tied to specific regions of the US : Oshkosh B'Gosh, Bass and Sebago Moc shoes, ( Maine) almost all of the children's toys, tools, clothing, appliances, machines and machine parts. What's left? healthcare ( only for the rich) , telemarketing, restaurants, ..... govt jobs,

There is too much money in the hands of too few. The U. S. government is throwing trillions of dollars away in Iraq and Afghanistan.