There has never been more confusion about mortgages than at this particular time in history. The collapse of the world economy can, in broad strokes, be laid at the feet of three parties; the Federal Reserve, mortgage lenders, and American home buyers. But mostly it was the fault of the private, for-profit company that manages our money supply – the Federal Reserve Bank.
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. Did you see Jon Stewart hammer Jim Cramer, the host of CNBC’s Mad Money, on who did this? Well, the answer is, the Federal Reserve Bank did it. Congress must replace the FRB.
Mortgage brokers tried selling a subprime mortgage to any prospect that had a pulse. 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 American government is using taxpayer money to buy liabilities.
And lastly are the people who bought homes they couldn’t afford, and then started whining that they didn’t know they had an adjustable rate mortgage. If not, things that are bad now are going to get worse and they may not ever get better again. Does that sound pessimistic? Good, because if you are not pessimistic now, you are a fool.
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