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What Caused the Economic Crisis of 2008?

What Caused the Economic Crisis of 2008?

I think we can sum up the cause of our current economic crisis in one word — GREED.  Over the years, mortgage lenders were happy to lend money to people who couldn’t afford their mortgages.  But they did it anyway because there was nothing to lose.  These lenders were able to charge higher interest rates and make more money on sub-prime loans.  If the borrowers default, they simply seized the house and put it back on the market. On top of that, they were able to pass the risk off to mortgage insurer or package these mortgages as mortgage-backed securities. Easy money!

What Went Wrong With Our Financial System?

The whole thing was one big scheme.  Everything was great when houses were selling like hot cakes and their values go up every month.  Lenders made it easier to borrow money, and the higher demand drove up house values.  Higher house values means that lenders could lend out even bigger mortgages, and it also gave lenders some protection against foreclosures.  All of this translates into more money for the lenders, insurers, and investors.

Unfortunately, many borrowers got slammed when their adjustable mortgage finally adjusted.  When too many of them couldn’t afford to make their payments, it causes these lenders to suffer from liquidity issue and to sit on more foreclosures than they could sell.  Mortgage-backed securities became more risky and worth less causing investment firms like Lehman Brothers to suffer.  Moreover, insurers like AIG who insured these bad mortgages also got in trouble.

The scheme worked well, but it reverses course and is now coming back to hurt everyone with a vengeance.

The Case Of My Greedy Real Estate Agent

My own experience with these greedy lenders and real estate agents happened about two years ago.  My wife and I were thinking about upgrading our home to something slightly bigger, and in a better neighborhood.  As we go through the process, we resolved not to do it because it would double our monthly mortgage payment and add another 20 years to our mortgage term.

creative-home-loan

Illustration from The Skinny On The Housing Crisis, published with permission. The Skinny On.

When I told the real estate agent I couldn’t afford the monthly payment, he said I could go for a 40 years mortgage with 5% down payment, and apply for more than what I needed so that I’ll have an emergency fund.  Basically, he advised me to decimate my cash flow and savings so that I can pay mortgage into my 70s.  And while I am at it, I should pay private mortgage insurance (PMI) for a couple of years.  Now, that’s irresponsible and greedy.

The sad thing about the scenario above is that I am certain there are borrowers who didn’t know any better and went along with a similar plan.

The Bailout And Who Should Pay

I don’t like the idea of government bailout, because the government is using my money to help out greedy bankers.  Unfortunately, it may be the only option we have right now, but I hope these greedy lenders won’t get away scot-free.  Somebody made a lot of money leading up to this crisis and they should pay for it — at least the government should make them.

In my opinion, the government should force conversion of bad mortgages into 30 years fixed rate mortgages.  The interest rate on these converted mortgages could be higher than normal.  This way it’s more affordable to more borrowers resulting in a lower default rate.  Yes the lenders will make less money, but in my opinion, they already made too much.  By the way, the borrowers aren’t completely innocent either, that’s why they should pay a little more as well.

Since it was fine from them to play with our economy and our lives, I think this is the least that they could do to take part in the recovery effort.  Why should my tax dollars go toward helping these greedy bankers who already made billions out of the scheme?  I am sure no one will come to my rescue if I my greed got me in trouble.

Other articles about the crisis and the bailout:

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What Caused the Economic Crisis of 2008? 1

134 thoughts on “What Caused the Economic Crisis of 2008?”

  1. Don’t forget the greed on the part of the politicians who insisted that sub-prime borrowers be given loans and then dreamed up all sorts of programs to fund them and back them with guarantees. They were greedy for votes and power.

    We threw all the normal parameters for getting a mortgage out the window because we wanted to increase home ownership among certain voting blocks.

  2. @Ron — It’s supposed to create opportunities, but I guess too much opportunities is a bad thing, especially when people aren’t prepared to receive them.

  3. I agree, lots of greed on both sides. It’s the cause of so many financial problems—everything from subprime mortgages to falling for the 419 Nigerian scam (how many people genuinely want to help some person in trouble?).

  4. I hate to say it but 9/11 and the tech bubble have a lot to do in this too. The Fed has kept rates very low since which enabled so much lending at such low rates. It was not sustainable. Like you mentioned once rates moved up it hurt all those with adjustable mortgages.

  5. What I don’t get.. did humans suddenly become more greedy the last few years? People say there is greed on Wall Street. Yet there was greed on Wall Street for hundreds of years. And there was always greed on Main Street, too. Who does not want to make higher returns? There has to be more to it. My litmus test… if we blame greed, do the solutions minimize our likelihood of recurrence? Heck, greed’s anytonyms can have unintended consquences on par with greed itself!

    What keeps all of us from chasing the most ridiculous returns possible? Risk.

    Rather than blame greed, what if we refine our risk management parameters so the greedy cannot dump their risk on the unsuspecting (including taxpayers), and the average person is less likely, or less able, to be an accomplice? If goverment regulates what should be regulated, yet does not encourage what should not be encouraged, I don’t think the rest of the actors can cause nearly as much trouble.

    The good news… the discussion being generated is so much better than if we were back in the days of television/newspaper and no internet. The better our collective understanding of risk, the less risky our system becomes.

  6. @Laura — I would hope so. I saw a news today about the the government wants a piece of the company for taking on the bad loans. I think this is a good idea in a sense that we are not just giving away money, but there’s a chance for us to recoup the bailout money by later on selling the equity back, or to the public.

    @Sean — No, greed always have been with us. Greed has many guises. Here we are seeing it as mortgage lenders taking on bad loans to make money. When the dot-com burst, it was greed on the part of venture capitalists, Wall Street, and investors driving up the prices on speculation.

    Because greed has many guises, there won’t be a universal test that could prevent something like this from happening again. People likes money and wants to make more money, so it bounds to happen. There are a lot of smart people on this planet and they will come up with a new mouse trap.

  7. Of course greed on the part of all involved but I think we can add bad management on the part of those making the rules. Everyone was allowed to indulge their greed without limits. The regulations were eased, there was no control.

  8. You hit it on the head with this post. GREED GREED GREED. I agree, why should my tax dollars go towards these peoples messing up? The market is going to be crazy the next few months as they sort out this mess, I just hope with the election here that people learn from past mistakes and realize we need some changes in the way everything works. Hopefully someone gets the picture!!

  9. Since we are spreading the blame around here (and there is plenty to spread), I would like to add that the entertainment industry has certainly played their part. Just look at all the shows on television (from reality shows to moronic sitcoms); how many are set in main street America? Very, very few. In movies, and on TV, everyone drives big cars, lives in big houses, wears flashy clothes, etc, etc. We quickly became a culture chasing bigger and better. Average home sizes have nearly doubled in thirty years. Nothing is ever enough.

    Perhaps the pendulum is swinging back in the other direction, and being frugal will once again become en vogue, either out of necessity, or because these events will scare straight those constantly outspending their paychecks.

  10. Isn’t the government going to make money in the long run though by taking on these debts?

    In a way the government is making a huge investment!

  11. The LENDERS didn’t even have to worry about borrowers defaulting. The lenders bundled their mortgages and sold them into the secondary market (Fannie and Freddie).

    By the time the mortgages adjusted and the borrowers defaulted, the lenders had long recovered their money.

  12. Pinyo, I’m not a fan of the government bailout either. I like your idea for converting mortgages to 30 year fixed mortgages at a standard rate. I think that would clean up a lot of the problems people are having with the exotic mortgages they signed up for – either out of ignorance or greed. I also agree with Sean’s statement about risk management. There was a massive failure that was endemic of almost the entire mortgage and loan industry. Stricter standards need to be adopted and enforced – otherwise this problem will repeat itself in a few years.

  13. And now Bernanke and Paulson wants $700 billion with no oversight, protection of taxpayers, or guarantee of result. Crazy! At least the Congress is doing something good this time.

    @Jason — Lack of frugality and irrational exuberance definitely plays a role here too. Agreed. But I don’t know if being frugal will ever become a fad…more like a necessity.

    @Uncommonadvice — With the “as is” bailout proposal, the answer is no. We are just assuming bad loan. Paulson even propose we pay premium for these bad loans.

    @Terry — Exactly, that’s why AIG is in trouble and Lehman went down. AIG insured these bad loans and Lehman invested in the derivative financial products based on these bad loans.

    @Patrick — Yeah, I think it’s a practical solution. So what if these mortgages will be less profitable for the lenders.

  14. Stabilizing the financial system should be the primary goal. We’ve been told for years by the rich that Government is bad…..now they want Government to bail them out….kind of ironic, although I don’t think we have a choice.

    What I want to see is the leaders of Freddie, Fannie, AIG, Lehman Bro’s, etc, stripped of their assets and sent to Jail……

  15. Greed is exactly what has happened. Sure, greed has always plagued some people…it has just consumed more and more people in so many different aspects. Example: Someone sells their home for a much higher amount. The next thing you know, that entire area or neighborhood is priced much higher. Buyers are swindled to believe they can afford the mortgage because their equity will keep building according to the Agents and lenders…they want the sale to go through. Appraisers are included and make the $’s match. And of course the city or county has to get in on it and raise property taxes.

    The stock market is controlling our gas prices. GREED! GREED! GREED!

    I could keep going however it is just upsetting and overwhelming!!!

    If it’s not greed then what is it…Our government? I heard a lot of people say if the Dems control the house and senate, we will be in big trouble… They control it. You decide. Although GREED is in fact a BIG part of the problem of the entire world.

  16. We can blame the government all we want but its truly ignorance and greed on the homeowners part. If they were more educated about the actual terms of their loans, maybe they would think twice. Maybe they wouldn’t because they really want that big house and all those nice things you can buy if you borrow over and into your equity, which is just a fictional amount anyways because homes go up and down and never just go up…..

    It is greed, but on the parts of stupid homebuyers and the lenders taking advantage of them. Just because you can get a loan, doesn’t mean you can afford it. We should learn to be a society less based on credit anyways.

  17. Lani, maybe so, but Americans have been sold on home ownership as the corner stone of the American Dream.

    Loan officers, lending institutions and some of the other “gatekeepers” were handing out mortgages to people who had no business being qualified for these notes. They are to blame, not your neighbors who are being thrown out of their homes

  18. Dead on correct. It looks like we might have real relief on the way that ties into what taxpayers want instead of the people who benefited from the tragedy. Dave Ramsey of all people suggested many of the components that are now being considered in a new swing at fixing the problem.

  19. This sure is a game of power and control motivated by greed, absolutely. The whole world is feeling the effect of this economic crisis, and it’s not as if the world is short of disasters to pick from. There are crises happening every which way you look, and they are hitting us faster and harder every time. Is there a way out of this mess? I can tell you there is. To get some light on this situation take a look at what Michael Laitman says at http://www.kabbalah.info/engka.....e/ynetnews.

  20. LOOK AT THE DATE!

    Fannie Mae Eases Credit To Aid Mortgage Lending
    By STEVEN A. HOLMES

    Published: September 30, 1999

    In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

    The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

    Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

    Read the rest of the article…

  21. Frank, are you telling us that there are no rich democrats in office and on wall street and that the “Federal Housing Enterprises Financial Safety and Soundness Act of 1992, which required Fannie Mae and Freddie Mac to devote a percentage of their lending to support affordable housing” had nothing to do with it?!?

    Blame lies in three different laps, the government for BAD regulation (regulation is needed, bad regulation is not), partisan politics (see the killing of the Federal Housing Enterprise Regulatory Reform Act of 2005), and turning a blind eye (“These two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis,” [Barney Frank – 2003 – Financial Services Committee]), the greed and excessive risk that the mortgage brokers and lenders practiced, and the individuals who borrowed FAR more than they could afford. I am still baffled as to how someone can think that they can afford a $300k+ home for $400/month.

    Now we have a bunch of politicians, a few of which were directly involved in the cause of this crisis, panicking and trying to come up with a so called fix that is full of more pork and not so well thought out regulations that in the end will do far more harm than good. One example of something in the bill that has nothing to do with the financial crisis is the following. “To amend section 712 of the Employee Retirement Income Security Act of 1974…to require equity in the provision of mental health and substance-related disorder benefits under group health plans…” Perfect timing for something like this!

    The point is that our future is in deep trouble. This Congress will make things worse, greed is inevitable, and no one is willing to take responsibilities for his or her own actions. Until we get people to take more responsibility for their own decisions and hold leaders, be they politicians or corporate, accountable for incessant mistakes, there will be no fix to our problems. Good luck!

    The cynic

  22. Be a cynic and fiddle while Rome burns………the reason we have a government to act (however unpopular) when it is needed….. I read that AT&T is about to layoff up to 20% of their workforce………the long slide to depression is beginning…how many cynics will there be on the breadline with you?

  23. I do not think I stated my point in the best fashion. We have an opportunity to act coming up very soon. The representatives from both parties have not made things any better. The Repubs, when in charge, lined their pockets, and the Dems have done the exact same thing over the last two years. There has been nothing but bickering, blaming, and belligerent, pompous blather coming from both sides and a whole lot of special favors going to a select few at our expense.

    Vote out the incumbents! We are the ones that decide who gets to make decisions and negotiate for us. We are the ones that keep putting the same crooks in charge. We need to make sure that these crooks are held accountable. Vote them out. If it takes two and six years before we get another chance to put someone better in after the current reps are ousted, so be it. Vote them out.

  24. Great article Pinyo, and I agree with you on who should pay for this crisis. In a way I think that it is really stupid of these banks to lend mortgages to people who can’t afford to pay their bills. I know that the U.S. has put these “American Dream” fantasy in our heads to advanced the economy, but really these banks SHOULD know better. It’s like a wise adult letting their children do whatever they want and going along with them in the plan.

    I just hope that this crisis ACTUALLY wake these banks (and the entire disorganized money system) wise up. I am starting to feel really disappointed at the U.S. financial system 🙁

  25. I think these greed firms should be changed into public firms where the public have the right to know before some policies were implemented. With these method, I think the public are more secure interm of borrowing money. Now, this disease was widely spread into my country and becoming worse. Do you think we should this existing system into Islamic Financial system?

  26. Did The US president (George W. Bush) have anything to do with the financial crisis? I mean where provoking those other countries is concern. I mean Gas went up mostly because of that, did’t it?

  27. I think its ironic that everyone wants to blame wallstreet. There was hardly a market for sub-prime mortgages before the GOVERNMENT forced Freddie and Fannie to increase the percentage of subprime loans in their portfolio. This created a large lucrative market for sub prime loans thanks to the government in the early 90s. Freddie and Fannie were paying a lot of money to buy up sub prime loans. Lenders were just providing what Freddie, Fannie, and the democrats asked for. Sub prime loans for anyone and everyone.

    As the housing bubble approached quite a few folks warned us about it. Some republicans even tried to regulate freddie and fannie but were blocked by the democats which were receiving large donation from freddie and fannie. Yes republicans are anti regulation for the most part but when they did ask for proper regulation it was the Democrats and a few Republicans that defected that blocked the legislation.

    It does not seem like anyone here wants to go to the root of the problem. I say start with the politicians who created the market for this and continued to profit off of it for over 16 years. Every politician who laughed at the regulators raising alarm about this crisis should be put in jail. Especially considering they blocked legislation to regulate sub primes so they could continue to get donations from Freddie and Fannie. Check their campaign contributions and then check and see how those politicians voted. They voted to create the market for sub prime loans and then to block the regulation.

    Investment companies just bought MBS which were improperly labeled as AAA rating when they should have been BBB-. Yes they should have known better but the ratings were supposed properly help them judge risk not slip them high risk MBS rated as safe investment or “virtually riskless” by Franklin Raines. And how is he not in jail? Oh ya because he is Obamas economic advisor. The number 1 CEO of Freddie or Fannie that is responsible for this is going to be helping Obama restructure our Financial system? Wow please educate yourself on who caused this before you vote for us to do it all over again.

  28. Good God how can anybody sit and blame anybody but who is in office, 8 years of George Bush bleeding the economy to the tune of 150 billion in Iraq and Afganistan? The second “do nothing” Bush to be in office. Do you all forget he has the final say with his vetoes? It’s been 8 years of Republican rule, Republican deregulation (yeah right, Democrats did it? quote the bill number and the those who voted for deregulation before you toss that nonsense out there!)
    Have we all forgotten Neil Bush, George’s brother who caused the collapse of the Silverado Savings and Loan in the late 80’s costing us tax payers nearly a trillion dollars in the bailout then? That’s a Republican.
    Everybody that voted twice for Bush, will vote for McCain, and vote for your Republican legistators deserve what you get. Another Recession. Ever see a Republican President that hasn’t caused a Recession? This one’s going to be closer to a Depression. When you paid and pay 3-5 dollars for gas because Bush stirred up the middle east and had no plan for it’s conseqences, when you have to help pay for unregulated predatory lending practices by 750+ billion dollar bailouts, when your businesses and families suffer because of lop-sided free trade agreements that pour products into our economy, and when your 401k’s, savings, and investments have lost up to half their values and you have to work well past retirement or hand to mouth, I hope all who voted the way they have also enjoy spiralling health care costs. Because everybody will need healthcare in their old age along with prescriptions. Enjoy wondering how you’re going to pay for gas, doctors and medicine, heat for your house if you even have one left, groceries, and just plain living. You all deserve it. You voted for it. At least when you hit retirement we can call your idiotic reasoning that some how it’s not Republican policies that did it dementia and alzheimers. But what we can call it now is ignorance and stupidity.

  29. Wikipedia.org explaines the Raines/Obama connection like this, with citations.

    Question of Raines and Obama connection
    On July 16, 2008, The Washington Post reported that Franklin Raines had “taken calls from Barack Obama’s presidential campaign seeking his advice on mortgage and housing policy matters.” [20]. Also, in an editorial in August 27, 2008 titled “Tough Decision Coming”, the Washington Post editorial staff wrote that “Two members of Mr. Obama’s political circle, James A. Johnson and Franklin D. Raines, are former chief executives of Fannie Mae.”[21] On September 18, 2008, John McCain’s campaign published a campaign ad that quoted the Washington Post reporting regarding Raines and Obama. The ad also notes that “Raines made millions and then left Fannie Mae while it was under investigation for accounting irregularities”.[22]

    Though they had not disputed the Post’s reporting before the ad, after it both Raines and the Obama campaign denied that Raines was or had been a provider of advice to Obama or the Obama campaign.[23][24][25]

    In later commentary, the Washington Post characterized McCain’s attempts to connect Sen. Obama with Franklin Raines based on their reporting as “A STRETCH,” and said that all reporting they did about the matter stems from a single conversation a reporter had with Raines, in which she recalls Raines said he “had gotten a couple of calls from the Obama campaign.” When the reporter queried Raines to the nature of the calls, he said “oh, general housing, economy issues.”[26]

  30. Up above Ron says this:

    “Don’t forget the greed on the part of the politicians who insisted that sub-prime borrowers be given loans and then dreamed up all sorts of programs to fund them and back them with guarantees. They were greedy for votes and power.

    We threw all the normal parameters for getting a mortgage out the window because we wanted to increase home ownership among certain voting blocks.”

    Nice thought Ron, but a perfect parallel. The reason the big money party wanted to push the subprime loans, was that their constiuents, the rich bankers and lenders wanted the free and easy money that came in the form of the fees and mortgage points. They could then abuse the mortage insurance institutions by shoveling the destined for failure loans onto them getting off with the fast money up front. Republicans deregulated the banking industry because (and your right on this part)
    1. Big money banks lobby heavily to their congressmen that they voted in, those politicians vote on bills that will keep them their jobs and perks.
    2.It was the Republican administration which directed Fannie Mae and Freddie Mac to more aggressively serve risky markets, and threatened their charter if they did not do so.
    On December 16, 2003, President Bush signed into law the American Dream Downpayment Act of 2003, which will help approximately 40,000 families a year with their down payment and closing costs, and further strengthen America’s housing market. This legislation complements the President’s aggressive housing agenda announced in 2002 to dismantle the barriers to homeownership.
    (From White House Press Release “American Dream Downpayment Act of 2003 – Expanding Homeownership Opportunities for All).

    The American Dream Downpayment Act of 2003 followed Bush’s admonishment that capital must be made available to “low- and moderate-income families, individuals with blemished credit, and families who have little savings for a down payment.”
    The Republican administration had HUD offer “zero down payment” mortgages, and risky 3, 5, and 7-year ARMs.
    It was the Gramm Leach Bliley Act that allowed banks to deal in mortgage-backed securities. Without passage of the GLBA by a Republican-controlled Congress, the subprime mess couldn’t have happened. Chief architect of the GLBA? John McCain’s economic adviser, Phil Gramm. Yes, that Phil Gramm. The GLBA was passed on a vote split along party lines (John McCain voted “aye,” by the way).

    The GLBA eliminated regulatory oversight that was essential to prevent the sorts of naked fraud that have fueled the current crisis. As a result of the GLBA and Republican love of deregulation, the banking industry was allowed to “opt out” of regulation, something that SEC Chairman Chris Cox now blames for the current crisis
    So let’s have the rundown, here.

    Were the Republicans responsible for (and did John McCain vote for) the Gramm-Leach-Bliley Act that allowed this deregulation that created this problem, way back in 1999? Yes.
    Does John McCain currently have Phil Gramm serving as his economic adviser on his campaign? Again, yes.
    Did the Republicans, in control of sending S190 to the floor of the Senate for a vote, fail to do so? Yes.
    Did the White House, putatively desiring to see the risks of Fannie Mae and Freddie Mac ameliorated, fail to take action when comprehensive regulatory legislation failed to emerge from Congress? Yes.
    Did McCain support reform of Fannie Mae and Freddie Mac? Not in any way that mattered, and certainly not when it would have done any good.
    Did McCain presciently predict problems with either GSE? Nope. He simply regurgitated the findings of the report created by the OFHEO.
    Given a second opportunity in the current Congress to address reforming either Fannie Mae or Freddie Mac, did McCain act or even speak toward convincing his compatriots to assert more regulation in order to avoid disaster? Clearly not.

    The clear indication is that this mess is primarily the result of the Republican love of deregulation. The Democrats, of course, deserve their fair share of approbation, having done nothing, themselves, to address the problem, either. But in the face of consistent finger-pointing laying the lion’s share of the blame at the feet of Democrats, the facts of the situation contradict that assertion. This crisis was engineered by Republicans, permitted by Republicans, and now that the chickens have come home to roost should be owned up to by Republicans.

  31. Ok you wanted some specifics of how we got in this mess… here are a few for ya rollo =)

    In 1995, as a result of interest from President Bill Clinton’s administration, the regulations for the CRA were strengthened.

    These revisions were credited with substantially increasing the number and aggregate amount of loans to low- and moderate-income borrowers for home loans. These changes were very controversial and as a result, the regulators agreed to revisit the rule after it had been fully implemented for seven years. Thus in 2002, the regulators opened up the regulation for review and potential revision.

    This required Freddie and Fannie to increase the percentage of sub prime loans in their portfolio which increased the demand for the sub prime loans by CREATING a lucrative market for them. Why wouldn’t a lender give a loan when it can just sell it to Freddie and Fannie for a profit?

    A September 11, 2003 New York Times article shows that President Bush proposed “the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.” His proposal: An agency within the Treasury Department to supervise mortgage giants Fannie Mae and Freddie Mac. here is the link to check on the article http://www.nytimes.com/2003/09.....e-mae.html

    And yet again in 2005… And, in case you were wondering, John McCain co-sponsored a bill requiring greater Fannie Mae / Freddie Mac regulation in 2005. It was also blocked procedurally by Democrats.
    http://hotair.com/archives/200.....it-crisis/

    And here is my favorite. Barney Frank and numerous Democrats talking about how strong Freddie and Fannie are and how there is not a problem at all!!!

    http://www.youtube.com/watch?v=xyspCRmJv7w

    Not to mention the top 10 recipients of campaign contributions from Freddie and Fannie are Democrats!!! That makes sense I guess Freddie and Fannie pay em to keep regulations off of them so they can make their numbers and get their 90 million in 6 years for running our financial system in the ground.

    I hope we have a investigation into this and put EVERYONE who screwed the American public in jail for this.

  32. Wasn’t it the Democrats that REQUIRED banks to give sub prime loans?
    Wasn’t Democrats that REQUIRED Freddie and Fannie to increase the percentage of their subprime mortages in their portfolio?
    Wasn’t it Demorcrats that blocked regulations of Freddie and Fannie for the last 10 years?
    Wasn’t it Democrats that received Campaign contributions from Freddie and Fannie for blocking the regulations?
    Wasn’t it Barney Franks boy friend that worked for Freddie and Fannie from 91-98 helping to setup this sub prime mess?

    The answer is YES. Democrats had a lot to do with the cause of this mess.

    The republicans have partial blame as well for not forcing the appropriate regulation of Freddie and Fannie while they were the majority. Unfortuneately a small percentage of republicans sided with Barney frank and the Dems =(

    As a rule of thumb I am pro deregulation like most conservatives. Its the government involvement that created the market for sub prime loans and got us into this mess. More governemnt is not the answer. Now I do agree with some appropriate regulation along the lines of what republicans proposed over the last 10 years.

    Last time I checked our free market capitalist society is what made us the Economic power in the world.

    Now we have the 2nd highest business taxes in the world. In a global economy which we have no choice but to participate in. Business will naturally go where it can make more money. That means jobs leaving America and going overseas where they are not taxed as excessively.

    Am I the only one that has a problem with socialist societies out there having lower business taxes then our “free market”?

    http://www.youtube.com/watch?v=xyspCRmJv7w

    Dems own words on the financial crisis in 2005 when the regulatory agency raised concerns of freddie and fannie!!!

  33. Last time you checked Samuel? Everytime something was deregulated, it allows crooks from any party to flourish. Perhaps in your fair city they should deregulate the police force? What I mean is, get that big ole goverment right out of the way. You can’t talk out of both sides of your mouth. You can’t pick and choose what you want governmet to get out of the way of. So, let’s see. Lets deregulate our U.S. Mail system, our schools and education, get private mercinaries to take over our military, and lets save some of YOUR taxes by not funding any home projects like highways. Lets go back to the frontier days and let the citizens just save some taxes and take care of paving their roads on their own, home school your kids, and save up your tax money for your retirement instead of participating in social security taxes and forgo any checks in your old age.
    Get that dang old government right out of the way when businesses save tax money but fix your own building when a natural disaster like Ike or Katrina comes along.
    There isn’t any sensible American that wants Socialism.. but no intelligent American would insist on a free for all capitalist environment where if there weren’t boundries and regulations, your tax worries would be over because somebody would break laws just to put you right out of business. Whether it be by plain old looting, or by some scheme to attack your business financially. Perhaps calling in your federally insured or backed small business loan when you could least afford it, raising interest rates so high without government protections?
    Maybe on a local level, mess with the zoning laws or patent rights.. Lets deregulate those. How about you pay no taxes! Not a penny. Then be proud when our military is out gunned, the immigrants that Republicans import to pick berries in their monopoly businesses invade us. Drive in the ditch instead of a highway that was funded by OUR taxes. But then again it would be somebody elses land you’re driving on, and not an easement protected by government that “got in the way” so stay home. Your customers can stay home too. That’s me and “Joe the Plumber” that buy your goods and services so YOU CAN PAY TAXES.
    So… the outsourcing’s a sore spot? Then you go overseas and not get taxed. Let big ole govenment get out of the way so there’s NO limits on imports. What ever it is that’s your business, lets let communist countries like China have free run over here, let Japan own every building around your business with NO restrictions. They’ll be glad to have the opportunity to replace you on the tax paying rolls to force you right out to Korea.
    Yep, let that big old goverment get right out of the business of governing, let the United States go back to the era of the wild west and get completely out on your own. Let me know how you fair when you have to compete totally unprotected with whole countries.
    Your links link to Republican based blogs, or conservative backed falsehoods. Enjoy the misery of the recession after recession Republicans have each and every time they’re in control.
    Just stop paying taxes. Vote for no restraints and no boundries or protections for your business. Then enjoy the memory of the business you’d lose.

  34. Those who do not learn from the mistake is doomed to repeat it. This very same type of greed and risky lending caused the great collapse in 1929, and it’s what caused it in 2008. Do we want to see it repeat itself for our grandchildren?
    It needs to be fixed alright, and fixed permanently. And part of fixing it, is knowing who caused it, and making them pay restitution. Continual deregulation of laws and rules that rein in greedy bankers, borrowers and politicians are a sure fire way to guarentee it happening again. I agree with Rollo up above. Seems the Saving’s and Loan collapse and crisis was swept under the rug and forgotten.

  35. Well Todd I have checked. History shows that a free market capitalist economy outperforms heavily regulated economies. All through history our economy has outperformed everyone elses for any extended period of time.

    Also when our government gets involved in our economy they have a great track record of causing problems our free market has to work out on its own.

    Its not talking out of both sides of my mouth to think there is appropriate regulation which prevents fraud. And unecessary regulation which is usually what our government implements.

    You can not honestly think our government is as efficient as the private sector. If you do … well… no point in talking to you =)

    So Todd I am curious how do you propose we deregulate goverment agencies? Thats not possible buddy the fact that the government owns controlls and runs our mail, police, and military makes them impossible to deregulate? … just an observation of how flawed your argument is.

    Regulation is government rules imposed on private agencies. You can not deregulate government agencies that would be privatising.

    As far as taxes are concerned I have no problem paying my taxes all I ask is for a fair tax rate. I am a huge fan of a higher minimum tax and a flat percentage to make it fair taxation instead of penalizing folks for being succesfull. Also for capital gains taxes keeping them low encourages saving which we obviously need, a tax increase on capital gains would actually make it harder for middle class folks to build wealth. And as for business taxes its simple. Companies look at tax rates, labour, and infrastructure as their main points in deciding where to move their business. We have the 2nd highest tax rates, and Obama will strengthen unions so that 2/3 that will be against us… wonder why they are going over seas? and Obama wants to increase business taxes and strengthen unions like that will help the situation =(

    The best way to strengthen our economy has been proven over the last 100 years. Its called free market capitalism if you dont believe me read up on it =)

    BTW its the conservatives that are pro-military research and developement, and have been trying to invest in our infrastructure with nuclear plants etc which have been blocked by democrats =(

    Basically I expect my government to build our military, infrastructure, and allow our free markets to function. I dont need our government to keep increasing taxes for handouts to the lower and middle class. Obama is going to be implementing the largest welfare addition in our history. His “tax cuts” are not tax cuts. They are hand outs to folks who do not pay income taxes for the most part anyways. His answer to everything is more government and income redistribution. Thats communism plain and simple and we know it doesnt work if you dont believe me ask Russia how it worked for them. Or check out all the other communist contries and see how they are doing.

  36. I just wanted to point out that who ever voted for George Bush twice, and plans on voting for his clone, John McCain should be made responsible and pay for all the current budget deficit when President Clinton had it balanced, along with the damage the economy has suffered at his hand..

    Are you all going to deny that Bush has been one of the most failed and destructive presidents in the last couple decades to our economy? What makes republicans so sure that John “Maverick” McCain isn’t going to give America the Coup de Gras in the the financial head?

    Let’s decrease out taxes by not giving “handouts” to other countries. Seems it’s ok to give a blank check for billions of dollars to let our “big government” meddle in the affairs of other countries. Do people not notice those tax dollars going up in smoke? At least if tax dollars are spent at home, it’s spent on U.S. citizens. For mostly good. Not a peep out of Republicans about the billions in waste to run the GOP war machine.

    I do agree with Todd above. Republicans can’t have it both ways. It’s ok to tax and spend on what THEY want to spend it on. Billions for war.

    Penalize the poor for being poor with a flat rate and higher tax minimum. A sure fire way to collapse the whole infrastructure of the country.

    There are quite a few countries that have a very, very successful economy and system. Norway, for instance has an excellent health care system, and everybody lives well. Very well. I’ve spoken with many of their citizens and those of quite a few other countries that have systems that keep their quality of life quite high.

    So who is responsible for the current mess? The tax situation etc. Ask a Republican and they go brain dead on who is the President with the veto pen. Who had control of congress for many, many years.

    Now to address the nonsense up above, it’s a far stretch to compare any presidential candidate to imposing communism. That’s just plain ridiculous. Paying taxes on income is the same as paying taxes on property and vehicles. It’s based on value. It’s the lower income and middle class that have the least tax deductions, loop holes, and depreciation to deduct.

    It’s the rich that have countless opportunities to dodge their “fair share”, so in proportion to what they make, the poorer and middle class are paying more in ratio to what they make.

    The funny part is, that when Obama does beat a toddering old fool and a straw brained woman, everybody will benefit from healing that will result, Democrats and Republicans alike. Just too bad it will be a big task and many years to recover from failed Republican policies, their greed and financial manipulations.

    Don’t be so quick to pretend that George Bush didn’t happen. You all voted for him, and we are all suffering because of your choices, past, present and future.

  37. I think the blame has to be equally shared between us as the consumers and also the banks. Some people are just happy to blame big banking institutions for irresonsible lending and this is certainly the case, however as consumers we have been ready to take on more and more debt without fully understanding the consequences of that in the future.

  38. Wow Stacy where to start with you… If you had read my comments above you would see that I dont go brain dead when you want to talk about the economy or taxes. Funny thing is the financial professionals and financial professors most seem to agree that the current crisis is not George Bush’s fault.

    I did not see anything in your numerous paragraphs that point to anything Bush did to hurt our economy? Lower more fair taxes had nothing to do with it. The war in iraq has to do with our deficit yes but not our economy as a whole.

    As for the bailout I am firmly against it and last time I check 66% of the democrats voted for it while only 33% of republicans did.

    I see you really want to try to champion norway as your example for universal healthcare and that they have a “great economy”. Last time I checked we still have the number one economy in the world! actually our GDP is over 3 times our closest competitor and I have not seen Norway on the Top 10 current GDP’s or even the top 10 fastest growing economies…

    Not to mention we have had some of the most costly natural disasters, terrorist attack, and financial mess left to George Bush. I dont think he has been a great president but I do know the majority of the financial problems started under Clinton. Not to mention the spending under Bush was influenced dramatically by democrats. Yes republicans were in the majority but not a decisive majority. The Democrats have been able to block bills from even making it to the floor for a vote because it was such a minor majority. Like the regulations for Freddie and Fannie they blocked repeated. =( This also helped democrats add in extra pork and spending to a lot of good bills.

    Also on healthcare every time folks try to point to a country with universal healthcare and say its such a great system, people look into it and realize that yes they are all covered but it takes forever to get treated and their treatment is sub par especially compared to our healthcare.

    As for the War I am pretty sure it received a vote and it was about 90% of the congressman, and public that agreed with it! As for how to handle it now we should deffinately finish the job. Leaving them high and dry after we have destroyed their infrastructure and letting them slip into a civil war is unacceptable. We would really be screwing them over worse then by pulling out early.

    On taxes we already have a progressive tax system. Every step towards taxing the wealthy more then they are and giving it to the poor is socialism. Sorry I have to disagree with you there that is not what this country was founded on and it does not work! Dont believe me ask Russia how it did for them when they competed against our free market.

    I really like the idea of a flax tax with no write offs for individuals it doesnt get any more fair then that =)

  39. 90% of the congressmen and public that agreed with the war were lied to by George Bush the Republican liar. Weapons of mass destruction? He lied to congress, lied to the American public, and lined both his pockets and the pockets of his pal Dick Cheney and Haliburton with all the military and oil contracts.

    What a fallacy to think the majority of the financial crisis started with Clinton. What was he? A time release capsule? Eight years of George “Do Nothing” Bush, who had plenty of time to correct or guide the economy toward anywhere but a huge budget deficit when the budget was balanced by Clinton, and he lead it straight into a financial disaster, once again a Republican Recession. Bush was the one that pushed the American Dream Downpayment act.

    On December 16, 2003, President Bush signed into law the American Dream Downpayment Act of 2003, which will help approximately 40,000 families a year with their down payment and closing costs, and further strengthen America’s housing market. This legislation complements the President’s aggressive housing agenda announced in 2002 to dismantle the barriers to homeownership.

    (From White House Press Release “American Dream Downpayment Act of 2003 – Expanding Homeownership Opportunities for All).

    The American Dream Downpayment Act of 2003 followed Bush’s admonishment that capital must be made available to “low- and moderate-income families, individuals with blemished credit, and families who have little savings for a down payment.”

    The Republican administration had HUD offer “zero down payment” mortgages, and risky 3, 5, and 7-year ARMs.

    It was the Gramm Leach Bliley Act that allowed banks to deal in mortgage-backed securities. Without passage of the GLBA by a Republican-controlled Congress, the subprime mess couldn’t have happened. Chief architect of the GLBA? John McCain’s economic adviser, Phil Gramm. Yes, that Phil Gramm. The GLBA was passed on a vote split along party lines (John McCain voted “aye,” by the way).
    Obviously Samuel, as Stacy states, goes brain dead when confronted with facts.

    Blame Bill Clinton for 8 years of Republican Bush disasters? Unbelievable.

    Call Democrats Socialists, but Republicans are hoping for a new Nazi party. Intolerance of other humans because of gender choices, skin color, and voting for perks for the rich at the expense of middle and lower class people. Thump their right wings on the Bible, screech against abortion, but it’s a wonderful thing to murder our young in the military and innocents in other countries we invade for their oil. Instead of sensible gun control, the GOP encourages poor gun legislation, but when shootings occur because of lax controls, it’s and eye for an eye and George Bush/Republicans love to watch a death row execution.

    You can tell when it’s spring time in Texas, as they begin having the executions outdoors.

  40. Well Tammy every one of those congressmen and Bill Clinton had access to the same intelligence that Bush had and they came to the same conclusion! If you are saying they just took Bush at his word and did not read the intelligence reports it sounds like they did not do their job?

    The fact of the matter is Military intelligence is not always right its a very hard task. Especially when Sadam was intentionally trying to make it look like he had WMD’s. If you dont believe me look up his last interview where he talks about it. Not to mention I have personally spoken to one of his former generals who believed he had the WMD’s.

    As for the Financial crisis lets look at the numbers. Bill Clinton had Freddie Mac and Fannie mae increase the percentage of their portfolios being held in sub prime loans dramatically. This accounts for Trillions of dollars in sub prime loans and also created a lucrative market for the banks to sell sub prime mortgages to freddie and fannie without having to bear the full risk of the loans.

    Now you pointed out Bushs program to help people with downpayments. You said it helped 40,000 families per year. Lets say they all bought 200k dollar homes which is a high estimate probably. That puts the tab at 8 billion dollars a year in sub prime loans. Even if it happened all 8 years of his administration that only totals 64 billion dollars. Nothing in comparison to the Trillions of sub prime mortgages caused by Bill Clinton and democrats. Not to mention by stacking up those trillions in sub prime loans before Bush got in leaves him holding the bag for the irresponsible lending encouraged and even mandated by the Clinton Administration.

    On the Balanced budget issue have you ever looked at the author of those balanced budgets clinton signed? It says Newt Gingrich. It was the Republican leadership in the house that wrote the balance budget =)

    As for the GLBA that did not cause the crisis the sub prime loans were there anyways. That allowed them to be packaged and sold. Selling MBS is a good idea as long as they are rated properly. If Barney Frank and Chriss Dodd both democrats which blocked any regulation of Freddie and Fannie durring the Bush administration because republicans did not have a major majority to push it past them.

    Mortgage backed securities are not the problem it is the sub prime mortgages being defaulted on and the improper packaging of sub prime mortgages with normal mortgages and given incorrect risk ratings putting them at AAA. When confronted with this Barney Frank and Chriss Dodd agreed with Franklin Raines that the sub prime loans when repackaged were “virtually riskless” … so why are they sub prime?

    Tammy I agree Bush has made his fair share of mistakes but this can’t be blamed on him. If you dont believe me try asking some financial professionals like I have. So far the Masters and Doctors of Finanace and Economics I have talked to have given me the opinion 9-1 that this mess was caused by Clinton more then Bush. Or maybe check the Wall Street journal who has been talking about this since 2001. You can also watch the committe meetings with the OFEO regulator who called for action in 2005 and was supported by republicans and blocked by… Barney Frank and company.

    Sorry Tammy I dont go brain dead I look at the big picture. You are talking about a few billion dollars of a Multi Trillion dollar problem. And you are lumping all MBS’s into one generalized statement when the only problem with MBS’s is the sub primes and improper mixing of sub primes with normal mortgages and improper ratings applied to them which Republicans tried to address and were blocked by democrats.

    Let me know if you have any questions =) I would love to hear back from you after you do a little more research.

  41. Dear Mr. Greed,

    I am but a humble worker with three children. I have to feed them. Would you please give me a job.

    Sincerely,
    Humble worker

    Dear Mr. Humble Worker,

    A real man would make something of himself instead of plead and beg for food. Get out there and start working. Why the Chinese even do it, and they don’t complain. But since I’m not a wholly cruel man, I may be able offer you a position that will pay you a pittance, tax you nearly to death, and still make me money. If you are interested, submit your application, and make sure to include a self-addressed-stamped envelope for my board’s final decision.

    Sincerely,
    Mr. Greed.

  42. Hello humbles, know alls, republicans, democrats, ……
    Some already got the riches and laughing.
    Some trying to make a (political) gain out of this.
    Some still trying to make even more riches out of this.
    and us, the majority, bewildered, talking nonsense.
    the riches, the problem, the solution has absolutely got nothing to do with us, other than us being the meat on the bone between the teeth of “some”.
    Think !!!! Who is biting and eating you?

  43. that is one of the reason ,just like years ago, I mean the financial crisis of 1929 to 1933 , that is also one of the reason, but economic goblization also make our economy more unstable..

  44. Just we should do sth, and face challenges bravely, thouth I am still a studeng in high school ,I’m concerned about it too. The financial crisis of 2008 is a special experience for me. My mom told me that they, teachers could not get money from government next month, I know this is a serious one.

    Mr Greed thanks what you said for our Chinese people. BTW I wanna tell you that being tolerated is our quality, special quality 🙂

    Let’s smile towards it, we believer everything will be better 🙂

  45. Couldn’t have said it better myself Pinyo. While it’s hard to definitively pinpoint the root cause of the financial mess we find ourselves in, I do believe that a major contributing factor was greed on the part of the Wall Street elite.

    The fact that hardworking, fiscally responsible tax payers are footing the bill for these bailouts is absolutely maddening, but it makes me wonder – what’s the alternative and will those consequences be any better?

  46. You detailed assessment sounds very reasonable and believable. But to summarize the problem as GREED is to short circuit your entire article. Greed, in the minds of the general public, is an issue of personal character, a moral judgement. It suggests that what is needed is criminal culpability. But the problem cannot be blamed on Greedy bankers. The desire to buy a house is not moral greed. The desire to offer loans is not moral greed. The desire to get ahead is moral greed. Getting ahead at the expense of others is a problem. It is not seen or accounted for in a competitive market place. It must fall on regulators who oversee the processes.

  47. I pray I am wrong . We my be experiencing a copu d’e tat (coup). We may have been taken over and this financial mess is what it looks like in the 21st century.

    THE MOTHER OF ALL TAKE OVERS. Now this country has become the largest prisoner of war camps!! I pray I am wrong.

  48. It is the flaw of the Captitalism that causes this Global Financial Crisis! The people in western tend to use the money of future today, but they cannot pay off the debt.

  49. There is plenty of blame to go around and there has been plenty of greed as well. God has much to say about usury and none of it is good.

    The banks levered themselves up over 40/1, the govt’s of the world allowed it, including ours. They reasoned the US would not be able to compete since everyone was doing it we needed to also. The banks gambled and lost and now we all get to pay for it and the central banks get to print themselves more money to lend to replace what they have lost/stolen. Before the bailout the central banks of the US, Europe and UK were for all practical purposes bankrupt according to Nouriel Roubini @ rgemonitor.com

    Nov 28 Headline

    Can Central Banks Go Broke? Fed Refuses To Disclose Collateral Composition And Recipients Of $2.8 Trillion Loans

    chrismartenson.com has a great crash course and I highly recommend it. On a slower computer there is a bit of a delay, but the audio is still worth it. We finished watching it this past weekend on the new computer my son built us for our Christmas present. It screams and cost less than $225. I paid for something I needed, he gave me the gift of his tech skill and time and I am unregretfully now a PC, something I never thought I would become.

    Instead of shopping after the holiday, we stayed home celebrating hearth and home and watched the Crash Course between courses. In it Martenson states, “the next 20 years will be nothing like the past 20. He then explains why. He makes some very good points.

  50. “I don’t like the idea of government bailout, because the government is using my money to help out greedy bankers.”

    Ok, now lets take a step back and introspect – try to find who’s been “greedy”:
    1. The government – in not stepping in to regulate a market that’s been called by leading experts the “financial weapons of mass destruction”. Perhaps out of fear that tax revenues would reduce by a significant amount.
    2. The United States Government – in particular for delinking money and gold. This is one of the root causes of this current crisis.
    3. The people who couldn’t afford coveted items leveraging in order to buy said items – this could be houses, cars, general loans for high-price electronics etc.
    4. The people again – who couldn’t afford yet didn’t sit back to think about how they would repay their leveraged positions.
    5. The people yet again – for not being responsible adults and weighing affordability against covetability.
    6. The bankers – for sustaining an illusion that anything is within reach of anyone, regardless of the collateral they can post or their income. Note that current income in no way indicates income over the term of repayment.

    So yes, the bankers are definitely at fault. But lets not forget the market that the bankers were serving. Lets not forget the governments that allowed them to do what they did. And finally, lets not forget the people who played a very active part in that market.

  51. While we obviously need massive restructuring to get us out of this mess, it’s still somewhat satisfying to point fingers. History, after all, is all about learning from past mistakes to prevent future ones. This article I just read on the culprits of the collapse really has my head spinning. Clearly I’m not alone in my thinking:
    http://www.wealthdaily.com/rep.....crisis/375

  52. Great artcile and commentary. Greed and Leverage were the causes of the financial crisis in my opnioin, though some thoughts in your reader comments are very apt.

  53. I have come across the whole story and i understand what make the economy worst, i would like to know how much time it will take to come to the normal state.

  54. The root cause of the Financial Crisis of 2008 is the unfettered creation of credit and money fueled by human greed for “economic and business growth” at any price and at any cost.

    Before the creation of credit, one has to save enough money to buy or consume a commodity or a service or to barter if no money is to be transacted.

    To boost sales, credit was invented and suddenly, when people are able to consume something with future money, GDP and the wealth of nations increase by leaps and bounces.

    When new and more creative money and credit devices are created e.g. the stock market, derivatives, futures etc, further balloon wealth is created and without the real physical assets to support the created mirage of wealth, it is a matter of time the balloon burst.

    Money can be created by printing, but real wealth is built upon sweat, blood and tears of enterprise, diligence and ingenuity.

    If more money can solve all of the world’s problems, the printing of more paper money will solve all the world’s problems, but we know that is not the case.

    The way out of this global financial crisis is for us all to return to the fundamental issue of what is the purpose of the human life and to add value while we are here on Earth.

    While we need money to live; living just for money make life a baloney.

    For us who lost much money through this crisis, be thankful, we could have lost our lives and sanity as well, so let us return to sanity.

    For us who has not lost anything because we had nothing to start with, let us be also thankful that the Lord Who feeds the sparrows and clothe the lilies is the same and identical Almighty that sustains us and to who all humanity destined to when our term finally expires on Earth.

    Let us through this crisis, return to sanity and appreciate the real meaning of living and begins to appreciate the serenity of Joy, Peace and Love, not necessarily with money and wealth.

    Goodbye 2008, Happy 2009!

  55. Greed?

    Do you run a business? Would you charge $1 for something that everyone else was selling for $5?

    The only greed existed in the liberals making racist lending programs. Lending institutions covered by the FDIC had to comply with strict regulations to make loans prior to the Clinton administration’s expansion of the CRA program.

    Afterwards ALL lendors could ignore the FDIC regulations and make loans to people who could not afford to pay them back. It was unconstitutional to deny non-CRA banks the right to make non-qualifying loans and not allow it for all banks.

    Clinton promised to pay back the defaulted loans. That is what we are doing. It is not a bailout. There are no restrictions on what the banks could do with the default insured money.

    You need to quit trying to lie about who is at fault here. There is too much information available to expose your dishonestly.

    • @DaddyYo — Why are you even accusing me of lying? You are entitled to your opinion and I am entitled to mine. This is a blog and I am writing from my perspective. Feel free to express your opinion about the crisis however you want, but don’t go around calling people liars because their opinions are different from yours.

  56. Feh, its called personal accountabilty. You KNOW what you can really afford, no matter what someone tells you. The fact that sheeple overleveraged themselves isn’t anyone’s fault but their own.

  57. I LOVE how Tammy and Stacy did not reply to Smauel, who completely owned them. While President Bush hasn’t been perfect, he is NOT the cause of this financial problem. While Clinton was president who was the majority of Congress? Republicans. They got us out of debt. Now who has been passing out money like it’s free to all these greedy bankers who will just use it to buy planes? (Citigroup), DEMOCRATS. just stop it already. This new economic stimulus package is ridiculous. The businesses getting it won’t increase thier jobs, they’ll do what they have been doing for decades, spend it on worthless items.

  58. I think the real issue is with how humans work. I believe in reaping what you sow. In a financial world such as ours, there are many people who are not really productive but still earning a lump sum just by leveraging on others. Its what they call “the rich getting richer and the poor getting poorer.” Personally, I really think that the so called white collar workers of the financial world do nothing to help the economy, rather they are building a time bomb that will eventually explode and kill themselves. You tell me the credit reserves of the bank is running dry, I tell you the credit reserves are dry only because it is somewhere else in the pockets of some paper shuffler. And these paper shufflers ain’t gonna own up, cause the financial crisis hit them squarely yet not on the face, but those on the lower end of the economy ladder will be hit the most and severe. In my opinion, the only true way to solve this financial crisis is to provide for the poor immediately and help the poor find a way to survive. The poor people must constantly be helped by the government so that over time the so called rich paper shufflers will also be spending their reserves and eventually lowering down their own status to match the poor. Bridging that financial gap is the key to solving this financial crisis. If the US government is thinking of a bailout, I suggest bailing out the poor and not the bank.

  59. whatever it is …. i believe one should be careful while taking decisions because its not only the company at loss..but a human can suffer a great deal larger.

  60. Greed, my shinny hind end. The only greed that caused this crisis was the greed of the Clinton adminsistration to try to by votes from poor people.

    Have any of you people ever heard of the CRA and the Clinton era deregulation of FDIC banks. Clinton hippies said “everyone should be able to own a house even those who can’t afford it” and put into place the no interest subprime lending to unqualified buyers that was previously prohibited under FDIC regulations.

    Because the US Constitutions demands equal treatment under the law, every bank was allowed to make unsecured subprime loans. Those “toxic” loans were then backed by (purchased) by Freddie and Frannie and repackaged to hide their worthlesness. Those repackaged products were sold and resold without disclosing that they were financed with bogus loans.

    Add to that the liberal meddling in the housing market decreased supply and increased demand and the prices went up to the point the entire market was over valued. The over value was evident when people started to try to cash in on their investment and realised they were holding an illusion created by the liberal government.

    It could be fixed. The people that the liberal government used to put them in power could be caused to pay for their complicity. Poor people could ose their homes nad their banks could fail and the market could go back to where it should be before the scam began.

    But that won’t happen. Brack Obummer can only think of “not letting a crisis go to waste” in order to grab even more power off the backs of honest Americans.

    Instead of fixing the economy all he can do is build windmills and pay back his supporter in ACORN and the labor unions.

    Liberalism needs to be destroyed – now. There is no hope in America today thanks to liberalism. Is this the kind of change we are supposed to need?

  61. Yo, DaddyYo, cool it man.

    At this crisis time, no amount of blame apportioning finger-pointing will be helpful, neither any panic knee jerk reactive actions or inaction.

    USA and generally the rest of the linked globalized world is facing what Dr. Peter Senge in his book “The Fifth Discipline” described as “paradigm paralysis” warranting a “shift in paradigm” and a change in “mindset”.

    In the past 100years, history records for us the failure of the planned economy a.k.a. soviet styled central command planned economy, culminating in the implosion of the Soviet Union.

    Now it seems the alternative to Soviet economic system at the opposite of the economic model continuum, the laissez-faire or free economy seems to be failing to the brink of a similar implosion.

    Thesis, Antithesis, Synthesis propound Hegel and Fichte is the dialectic thinking outside our boxed paradigm and dogmatic mindset way out of the similar global economic-financial hammering at the very remaining foundations of the capitalist system since the other alternative had failed more than 2 decades ago.

    Age old and universal dialectic is the way to go, but can 21st Century homo sapiens put aside personal and even national interest for the sake of the larger and paramount global interest?

    Alas, I am pessimistic.

    The human race is far too parochial and divided to see beyond his own navel to see ourselves as citizens of island Earth in the whole wide Universe.

    There is no other place we can call home, save Planet Earth and it is only when we see ourselves facing the same identical fate that we shall either swim or sink together as one humanity.

    There is still hope, if we remain united as one, united by common purpose and meaning because we are humans sharing a common Earth, then only can we see the meaning and purpose of enriching our neighbors because it will ensure our own survival too.

    Like it or hate it, the person who taught us to love our neighbor as ourselves some 2000years ago still rings true today, but will the words of Jesus Christ, a Jew from the tribe of Judah still have a place in our heart let alone in our ears alone?

    May the Good Lord forgive our sins as we repent and do what is right before Him, comprehensive and holistically from as diverse a matter as the environment to personal finance.

  62. Daddyo is correct. The Community Reinvestment Act (CRA-established in the Carter Admin.), the 1980’s ACORN lawsuits, and the Clinton administration quota/affirmative action bastardizations created a system that has failed. Banks were forced to lend to proportional amounts to lower income, lower credit worthy borrowers. If the banks did not abide by these govt. established rules, then they would not be able to expand their branches, charters, or engage in any M&A with other banks. Couple legistlation with the monetary policy of the early 2000’s following the Tech Bubble/911, and liquidity became readily available to anybody with a pulse.

    I really have a hard time placing too much blame on banks when many risk managers could see the path we were heading as early as the late 1990’s. Really, in my opinion, the blame should be placed on the government that was elected in the 1990’s and the people that bit off more than they could chew in the 1990’s-2000’s, who incidentally voted that administration into office.

    Since you read Senge’s book Alex Kee, you should really have a keen understanding of “Systems” and how 90% of human behavior is influenced by the system in which it is a part. Democrats should be held accountable for this mess for the creation of such a flawed system, albeit I hope their intentions were well placed.

    As an aside, how is Barney Frank still in office and on our Finance Committee? Has anyone noticed how he was opposed to regulation of the banks’ lending practices, and now is screaming for regulation? Has anyone noticed the small bank in his district getting bailout funds when there are hundreds of larger banks in need of assistanc? Conflict of interest?

    I really feel that too many Americans today want something for free and are unwilling to strive for the PURSUIT of happiness which has made this country so great. Equality of opportunity is not nearly the same as, and does not guarantee equality of outcome.

  63. Ted, if you grasp the spirit and not just the letter of Peter Senge’s Fifth Discipline, we will less likely to be gridlocked into chronic paradigm paralysis by endless finger pointing rhetoric but join in the light of the New Hope led by the President of Change: Barack Hussein Obama.

    The name Barack Hussein Obama is in itself, an antithesis to the legacy thesis of USA and unless we confront the failing thesis with another alternative antithesis to arrive at synthesis, we remained captives of our own paradigm, that’s my point.

    Partisan politics has its role in its safeguard against tyranny through a comprehensive system of checks and balances including the separation of powers, alternative competing philosophies and a free press, but not when America and the rest of the world who follows American leadership in ideals, values and economic system are in trouble and seeking ways towards a new paradigm and even adopting a new mindset.

    Change, we must and Change we ought to, for where there is No Change, there is No Chance!

  64. Alex,

    Your posts have to be a joke, right? Nobody really thinks and writes like that in seriousnees. If you are serious I feel sorry for you and anyone elese that think like you.

    “Change we must” – yes, we need to change this administration. The zombies that voted for Obama are beginning to wake up from their stupor and are seeing the mistake they made.

    What change? Obama is just the same old radical liberal we have had in this country since the spoiled daughters of the industialist met at Thompson Square and formed the American bohemia.

    I think partisan politics should be put aside until the liberalism that is destroying this country is defeated.

    Ted- thank you for the kind words. You aren’t the real Ted Nugent are you?

  65. I think all this means that the blunderous(sorry if you dont find this word in dictionary 🙂 ) and greedy system called CAPITALISM is a failure.
    Socialism is too Cruel to be applied for westerners.
    What should we do?
    Should we put together our heads and create a new system???
    We already have the solution.
    Guess what??

    Islamic system…

    Nothing can be better than the God’s system.
    OK boys?

  66. Faisal – no it means that liberals shouldn’t screw up the free market trying to buy votes.

    The Islamic system? Yeah right, that has been a real winner throughout history. I guess if you don’t like the “heads” that you want put together you would just cut a couple of them off.

  67. Yo, DaddyYo, I am beginning to like you and that is not a joke, seriously. I like your candidness and if you are as serious as I am, even naive, it is fine with me, we are all entitled to our own views and as long as we don’t seek and use violence to promote or instill our beliefs, it is entirely fine with me.

    I just have one question.

    If you know the problem(s) what is/are your solutions?

    If you are the President of the USA, what would you do save blaming people, parties and systems?

    And to Faisal, your Islamic system as the new paradigm is interesting, can you share a little details how the Islamic system is the better vis-a-vis Marxism and Capitalism, save the God system part, because the US Dollar has the famous “In God We Trust” and yet her economy is in shambles! And please don’t tell me they are different gods here, to me it is irrelevant and irreverent.

    Tell me why and how “Islamic Economics” is different and better than the two other systems in the dichotomy or continuum.

  68. [:D] interesting

    I am still a student but I am quite sure about following principles of Islamic economy:

    The fundamental principles of the Islamic economic system are as follows:

    * Muslims are not to deal in interest. “Those who devour usury will not stand….Allah has permitted trade and forbidden usury…. Allah will deprive usury of all blessing, but will give increase for deeds of charity….” (Qur’an 2:275-6) “O you who believe! Devour not usury, doubled and multiplied. But fear Allah, that you may really prosper.” (3:130) This prohibition is for all interest-based transactions, whether giving or receiving, whether dealing with Muslims or non-Muslims. It is reported that the Prophet Muhammad (peace be upon him) cursed those who pay interest, those who receive it, those who write a contract based on it, and those who witness such a contract.

    * It is forbidden to gain property or wealth by fraud, deceit, theft, or other falsehoods. “…Give just measure and weight, and do not withhold from people the things that are their due. And do not do mischief on the earth after it has been set in order. That will be best for you, if you have faith.” (7:85)

    * It is particularly hateful for a guardian to take from an orphan’s property. “To orphans restore their property (when they reach their age). Do not substitute your worthless things for their good ones, and do not devour their property by mixing it up with your own. For this is indeed a great sin.” (4:2)

    * Forbidden are earnings from gambling, lotteries, and the production, sale, and distribution of alcohol. “O you who believe! Intoxicants and gambling, sacrificing to stones, and divination by arrows are an abomination of Satan’s handiwork. Eschew such abomination, that you may prosper.” (5:90)

    * It is unlawful to hoard food and other basic necessities. Everyone should take what they need and no more. “And let those who covetously withhold of the gifts which Allah has given them of His Grace, think that it is good for them. No, it will be the worse for them. Soon it will tied to their necks like a twisted collar, on the Day of Judgment. To Allah belongs the heritage of the heavens and the earth, and Allah is well-acquainted with all that you do.” (3:180)

    * A Muslim should be responsible in spending money. Extravagance and waste are strongly discouraged. “[The Servants of Allah are] Those who, when they spend, are not extravagant and not stingy, but hold a just balance between those extremes.” (25:67) “O Children of Adam! Wear your beautiful apparel at every time and place of prayer. Eat and drink, but waste not by excess, for Allah loves not the wasters.” (7:31)

    * Payment of Zakat (alms). “And they have been commanded no more than this: to worship Allah, offering Him sincere devotion, being true in faith. To establish regular prayer, and to give zakat. And that is the religion right and straight.” (98:5) Every Muslim who owns wealth, more than a certain amount to meet his or her needs, must pay a fixed rate of Zakat to those in need. Zakat is a means of narrowing the gap between the rich and the poor, and to make sure that everyone’s needs are met.

    * Muslims are encouraged to give constantly in charity. “Your riches and your children may be but a trial. Whereas Allah, with Him is the highest reward. So fear Allah as much as you can, listen and obey, and spend in charity for the benefit of your own souls. And those saved from the selfishness of their own souls, they are the ones that achieve prosperity.” (64:15-16) The Prophet Muhammad once said that “nobody’s assets are reduced by charity.”

  69. The things I like about Islamic Economics are:

    1- Respect for every Human being

    2- Respect for resources

    3- Circulation of wealth-
    I hate Billionaires. They are just another human being like us but have billions of $$$$$$$$$$$
    Every person has the right to pursue his happiness but bot hurting other people. Billionaires are Vampires 🙂

    4- It kills the usury(interest).
    Give him $100 today and tommorow he has to pay $115.
    Interest based system causes the money to go in very few hands.

  70. Faisal, interesting ideas no doubt, but neither new nor fresh I am afraid.

    It seems to me another Utopian Dream Economics ala Marxist or Egalitarian with the element of “God” skew.

    I am also personally against Usury but see Capital as one of the two other economic resources: Land and Labor.

    For the reward for the use of Labor is the payment of Wages, Land: Rent and Capital: Interest, Dividend, Profits etc.

    Money is a form of Capital and the risk of parting of one’s money (cold cash, gold, liquid convertible assets) surely had to be the reward or incentive of interest as returns.

    For the past 1400 years or so, we have yet to experience a viable “Islamic Economic System”.

    Perhaps out of the ashes of Marxist and Capitalism Collapse, could we see the emergence of the Synthesis, with Islamic as a potential candidate?

    Well, I am no prophet so I cannot foretell.

    But certainly, with the Islamic Economic System as painted by you, I would rather be the hammer than the nail i.e. the Borrow, rather than the Lender ;-).

    No malice meant here but I am always tickled pink by a Notice I saw hanging out from a shop in Los Angeles, California, USA.

    It says in Bold:

    “In GOD we Trust TRUST, others pay CASH”

    To me that is the succinct meaning of the printed slogan on the reverse side of the US Dollar Bill or was that the cheeky hint that In God we Trust and not others because all man are liars, politicians, bankers, lawyers, priests, imans, monks, soldiers, homemakers etc etc.

    Well, you make your own conclusion(s).

    By the way, I am not a youth anymore, but I am still a student nevertheless, because for as long as I live, I continue to learn new things and often by first unlearning the wrong or outdated, obsolete things first.

    But one truth remains:

    Let God be true and all Men: Liars! (Romans 3:4, Psalms 11:16)

  71. If you dont believe in God then my information is useless for you.

    No billionaire will want to give 1/40 of his wealth to the poor and needy every year. He has to be forced by some system which is God’s system not man’s system.

    US govt and Marxism and Capitalism just use the word God for their purpose. These people just want to rule the masses.

    I hope you understand.

  72. Faisal, I think your paralyzed by your prejudice paradigm.

    It does not matter whether one believes in God or not, all humans need air, water, food, shelter etc to survive and in the modern day, money usually buys all these necessities and that is what money is for: a mean to an end.

    No billionaire will want to give the 1/40? You mean billionaires who claim themselves Muslims or “infidels” billionaires like Warren Buffet and Bill Gates?

    Go check your facts before you speak, please.

    Usually the worst people are the religious hypocrites and that transcends religion type.

    You may ask, how can we build and maintain billion dollars cathedrals, temples and religious buildings when so many of our neighbors die from the lack of basic potable water, nutrition, clothing and shelter?

    When we rather spend our scarce resources on so called “defense” killing one another rather than helping one another because I see my Father’s creation in my brothers and sisters face although they bear a different color and have a different religion from me?

    Why did God create such a mess with so much diversity when He could have just created one homogeneous commodity of humanity with identical color skin?

    My take is even if we are homogeneous in color, homo sapiens will still fight one another because like it or not, there is an inherent class struggle defect in the human species!

    The conclusion is not whether I or you believe in God, but are we prepared to love one another as brothers and sisters because we share a common ancestry, a common Earth and a common Destiny when we are gone from planet Earth, now or in the distant future when all things must come to an end, even the Solar System exploding into oblivion?

    If we know how significant we are, we will become more generous with others.

  73. I dont have any sort of prejudice. Read again my replies. I wrote “I hope you understand” because I was afraid you could not understand :).

    Regarding 1/40 , I highlighted the golden rule of Islam that forces every person with a specific amount of Gold or equivalent amount to give away 1/40 of his wealth. Imagine if every rich man shares his 2.5% wealth with others once a year. He will never become poor but I bet there will be nobody sleeping hungry in any country of the world.

    Religion is not bad, it is those hypocrites that use the word of God “to rule the masses”.
    You malign the religion using example of those people.

    My facts and references are correct. I dont know why you are protesting.

    Islam stands out as a great source of wisdom and light. Apply the rules of The Book. Abide by them. Get the result straight away!

  74. Faisal, I got your point, but your great proviso is still the big “IF”.

    Islam is no different from all other religions I supposed, they all espouse good works but alas their followers hardly follows.

    2.5% per year is ambitious. if it is just 1% and from all the combined wealth of Middle East Oil revenues itself, I suppose Muslim countries like Pakistan, Indonesia, Palestine etc will be very well today, but alas the classic failing rings true cross culture and religion: Good Religion; Bad Followers.

    Yes, it is still the big “IF” and I guess we all can always dream and hope, but the reality still is, I assert:

    “Let God alone be true and all men (and women), Liars (me included).”

  75. All religion are not the same.
    Let me say that Islam is different from all other religions. All religions say good things but it is only Islam that shows you the way to solve the problems. If we apply all the principles of Islam, then believe me this world will turn into a mini paradise. The world will be much better than how it is today.

    And that IF will remain there because this life is a test.
    Besides wishing we can begin the change by changing ourselves. Guess what?
    Run a complete scan of yourself like for a virus in a system, clean the viruses. Change has begin.

  76. Alex: I agree with you for most of your comments and advices but nevertheless Faisal is right. You have made a mention…”It does not matter whether one believes in God or not, all humans need air, water, food, shelter etc to survive and in the modern day, money usually buys all these necessities and that is what money is for: a mean to an end”.

    Brother, why don’t you think of the things that money cannot buy …. You can see the system made by man and it always failed. Show me any system which stayed for at least a good period of time where all human beings prosper. If we all collectively try to implement the system God has given us, we can prosper without any further failures. But unfortunately not many have adopted this as a financial system for the country other than the early Islamic days. Every one know that Arabs were one of the poorest human beings then, but after the implementation of Islamic financial system, you will be amazed to know that there was a point when there was no one in the whole Arab califate who was eligible to accept the Zakat amount.

    Islam don’t allow a man to take money from charity who has an extra asset costing more than 75 gms of gold, because then the man will become eligible to start paying the Zakat (2.5%) from his assets to the other needy.

  77. I applaud the fact that you made the right choice in turning down a 40 year mortgage with PMI. However, I don’t agree with you as to whose fault this is. It is NOT the bank’s greed. It is the personal greed. Everyone had their own choice as to whether they should get a bigger mortgage or a mortgage at all. We need to be responsible for our own actions. Just because you can buy something, does it mean you should? This is a great lesson to all of the people who have been living to the edge or out of their means. Wakeup call for the US and its consumers….maybe they will learn from this.

  78. As a chinese, i feel you guys most responsible and most active to perceive the finanacial crisis. To be frank, china is also affected seriously. Especial for the graduated students. They paid so many time and energy searching and hunting everywhere only to get an unideal job. Under such an environment, all of us
    debase our requirement just to survive. As a words going, survive first and then develop. Currently it seems we just wana to slog for our three meals instead of considering how to improve to our ability. Thas’s terrible. Anyway, hope all of us hang together handle it step by step.

  79. Summer, we are all naturally wise, retrospectively.

    The 2008 Global Economic Crisis is rooted in easy unbridled, unregulated and undisciplined credit.

    But ironic it may seem, the availability of easy credit is what that grew the global economy in an unprecedented pace in the last 10 years.

    The invention of credit was also what that spearheaded the accelerated growth of business, trade, commerce, manufacturing, mining, banking and every aspect of the economy.

    In the subsistence economy of old where each family grew their own food and are self sufficient substantially, there is little trade and the economy did not grow much on an aggregate basis.

    It was the creation of credit, where one can consume now with future wages, profits and income that made the sale of house, automobiles and other big ticket items take off in a mass market scenario.

    China tried to manufacture its way out of poverty by selling its products to USA at the expense of paying a high environment cost for it, an now, she is paying a disproportionate level of cost, financially, economically and even politically and socially.

    China in fact lend USA the money she made from the selling of goods and services to USA, so that she can continue to buy Chinese goods.

    China, like Japan holds much US bonds and hopefully the Chinese will remain sane and not dump US bonds for US cash, causing the collapse of the US economy internationally.

    China and Japan, together with the rest of the world outside USA, especially Europe are now like multiple commonly joined “twins” and we have no choice but to float or sink together as one big globalized nation.

  80. What can be the cause of 3rd world war?
    Guess??????????????

    Crash of Dollar. China can very much do it. But being a responsible country China will try to stabilize the American dollar. China’s own economy is at stake with dollar.

    But I think no one can save dollar from crashing. Its just a matter of time when America will disown dollar and Print a new currency called “Amero”. Search the google for amero and read the details.

    I think the wiser countries should move their assets from Dollars to real wealth. Yes I mean gold and silver. At that time dollars will be mere pieces of papers.

    The only way to prevent that war is to neutralize all the jewish free masons and zionists and start The Gold currency standards.

    Or at least say Goodbye to federal reserve banking.

  81. Faisal, neither gold nor silver nor any form of currency is “real wealth” as you perceive.

    The only real wealth that exists on earth are the lives you impacted upon while you are alive on earth, and that is not even in the pie-in-the-sky “Heaven” or Paradise with flowing rivers of wine and multitudes of virgins to service you.

    If we had returned and remained in the gold or silver standard domain of the old, we would have turned the clock back to the Middle Ages.

    Whilst I do not condone the wanton creation of false wealth by the printing of money or credit, curtailing economic growth to the pace of how fast gold and silver could be mined and minted into currencies is no solution either.

    If USA has to print the Amero, so be it, if it solves the global economic problem; but things are not so simple. However, it is a much more progressive idea that regressing to medieval solutions.

    By the way, it is easy to blame others for problems we ourselves also contributed to in whole and it parts, so please, minorities are always easy to a target at, as we, as a so called humanity had ill-treated for a more than 2000 years.

  82. Your thoughts are good but I strongly disagree to your argument :

    “If we had returned and remained in the gold or silver standard domain of the old, we would have turned the clock back to the Middle Ages.”

    Gold and Silver currency means freedom and real economy not just paper economy and digital economy. The “fractional reserve banking ” is a disaster and only real wealth can be solution.

    I think quitting the paper zionist currency is the only option.
    I dont know why the jews want to take over the world. Probably they want to take the revenge of the 2000 years humiliation that they have been facing through the hands of Muslims and Christians.

  83. Faisal, FYI, paper money was first invented by the Chinese, that is factual history; “paper zionist currency”, I am not certain.

    I do foresee a day where paper money will disappear, not because it is outlawed, but because there are better ways to transact as in mobile money in Africa via mobile phone money transfers.

    History also shows us for what the Muslims collectively persecuted the Jews: it is pale compared to what the Christians collectively persecuted the Jews, culminating in Nazi Germany’s mass extermination of the Jews in the Second World War (of course this historical verifiable fact is still being disputed by certain people and certain parties, then and even now).

    Gold, silver, platinum, titanium and all minerals need to be mined, refined and minted, and in order for them to have any intrinsic monetary exchange value, they must be sufficiently rare.

    To bridle any economy on the account of the pace on how fast gold and silver in the ground or in the sea could be processed and turn into money would be foolhardy in the context of a 21st Century globalized economy.

    Gold and silver was the the currency of China, and the currency of international trade with Europe during the 1800’s, but as you are aware, when silver flowed out of England into China and tea leaves flowed vice-versa, the tide was only reversed when British opium, grown in occupied India flowed into China and silver flowed back into England that started the Opium Wars that ended the Ching Dynasty that started the Modern China period.

    No, much as gold and silver I like to own, nothing is like melting down the Silver Saints and circulate them into the economy, plagiarizing Oliver Cromwell.

    At the end of the day, it is the people that matters and we all wonder how can the rich live off the sufferings of the poor and that applies to all seats of powers: political, religious, organizational etc.

    What is the meaning of Saint Peters Cathedral in Rome, Saint Pauls in London, Kaaba in Mecca, Taipei 101, Petronas Twin Towers, Shanghai Tower etc when billions in the world are without even the most basic drinking water, sanitation, nutrition, clothing, warmth and shelter?

    The world is not without its riches and there is enough wealth to spread around, rather it is the unequal and inequitable distribution of wealth where it ought to have been distributed willingly by the haves to the have nots that is the root of the problem.

    Throughout history, thinkers and philosophers had tried to think and seek out a solution, from the Buddha right up to Karl Marx, various solutions from personal enlightenment to social re-engineering had been propounded, but none seems to work.

    Faisal, your Muslim Solution is one of the many propounded solutions, I am afraid.

    There are challenging times ahead of us and as we create solutions to an old economic problem, let us remain optimistic and open minded and not be boxed up by our limited parochial interest and perspective and blinkered by our prejudice and mantras.

    Peace to you, my friend.

  84. This is the second time that you have blamed me of prejudice in this discussion 🙂
    All I have said is supported with the facts.

    God has created these metals “sufficiently rare”. It is not that God made us but He forgot to give us a system.

    The independant metallic currency is a good solution to at least set the countries free from the slavery of USA, World Bank, IMF. You might have read the book “Confessions of an economic hitman”. A WB employee describes how WB enslaves countries.

    Papers currencies are enslaved to the dollar and so are the people of those poor countries.

    Countries are manipulated by modern Western capitalism system and American and Europians are slaves to Rothschilds etcs.

    John F Kennedy was murdered. Why and who killed him?
    He wanted to issue Gold or at least Gold backed currency. He was killed by Mossad. Now Mr Ron Paul is giving some ideas of this kind in US senate. He will be assasinated if he becomes popular.

    Has human being got themselves out of the age of Slavery???????

  85. Let us revise this flawless Islamic system:

    This system is open to debate I challenge everybody to prove anything wrong here. If not then we should accept this system.

    The fundamental principles of the Islamic economic system are as follows:

    * Muslims are not to deal in interest. “Those who devour usury will not stand….Allah has permitted trade and forbidden usury…. Allah will deprive usury of all blessing, but will give increase for deeds of charity….” (Qur’an 2:275-6) “O you who believe! Devour not usury, doubled and multiplied. But fear Allah, that you may really prosper.” (3:130) This prohibition is for all interest-based transactions, whether giving or receiving, whether dealing with Muslims or non-Muslims. It is reported that the Prophet Muhammad (peace be upon him) cursed those who pay interest, those who receive it, those who write a contract based on it, and those who witness such a contract.

    * It is forbidden to gain property or wealth by fraud, deceit, theft, or other falsehoods. “…Give just measure and weight, and do not withhold from people the things that are their due. And do not do mischief on the earth after it has been set in order. That will be best for you, if you have faith.” (7:85)

    * It is particularly hateful for a guardian to take from an orphan’s property. “To orphans restore their property (when they reach their age). Do not substitute your worthless things for their good ones, and do not devour their property by mixing it up with your own. For this is indeed a great sin.” (4:2)

    * Forbidden are earnings from gambling, lotteries, and the production, sale, and distribution of alcohol. “O you who believe! Intoxicants and gambling, sacrificing to stones, and divination by arrows are an abomination of Satan’s handiwork. Eschew such abomination, that you may prosper.” (5:90)

    * It is unlawful to hoard food and other basic necessities. Everyone should take what they need and no more. “And let those who covetously withhold of the gifts which Allah has given them of His Grace, think that it is good for them. No, it will be the worse for them. Soon it will tied to their necks like a twisted collar, on the Day of Judgment. To Allah belongs the heritage of the heavens and the earth, and Allah is well-acquainted with all that you do.” (3:180)

    * A Muslim should be responsible in spending money. Extravagance and waste are strongly discouraged. “[The Servants of Allah are] Those who, when they spend, are not extravagant and not stingy, but hold a just balance between those extremes.” (25:67) “O Children of Adam! Wear your beautiful apparel at every time and place of prayer. Eat and drink, but waste not by excess, for Allah loves not the wasters.” (7:31)

    * Payment of Zakat (alms). “And they have been commanded no more than this: to worship Allah, offering Him sincere devotion, being true in faith. To establish regular prayer, and to give zakat. And that is the religion right and straight.” (98:5) Every Muslim who owns wealth, more than a certain amount to meet his or her needs, must pay a fixed rate of Zakat to those in need. Zakat is a means of narrowing the gap between the rich and the poor, and to make sure that everyone’s needs are met.

    * Muslims are encouraged to give constantly in charity. “Your riches and your children may be but a trial. Whereas Allah, with Him is the highest reward. So fear Allah as much as you can, listen and obey, and spend in charity for the benefit of your own souls. And those saved from the selfishness of their own souls, they are the ones that achieve prosperity.” (64:15-16) The Prophet Muhammad once said that “nobody’s assets are reduced by charity.”

  86. Faisal, I am a keen reader of history and if my memory serves me right, the last Ottoman Sultan was bankrupted and had to be done away with with the lost of the Axis to the Alliance in the Second World War.

    I am not certain if the Ottoman system is Islamic for you, if it is, your theory about the flawlessness of the Islamic system you claimed as revealed in the Koran and elsewhere remains, at best, a pipe dream (pun unintended).

    If not, there probably will never be a viable “Islamic Financial-Economic System”, empirically.

    Name me please, your working model example: Taliban Afghanistan, Wahabi Saudi Arabia, Secular Islamic Indonesia, Islamic-Islamic Pakistan. Islamic-Malay Brunei?

    You are probably referring to the system to come in the future, just as Christians look to the Millennium Rule of Christ or the Buddhist for the coming of the Maitreya Buddha of Prosperity.

    If so, I rest my argument because Utopia will always be a dream like Heaven or Paradise may seem to be for all us lost souls yearning for a better place and a better in eternity. This is what many deemed as “Hope beyond Hope”?

    Mind my cynicism.

    We only have one life, we only have one Earth and we only have one chance on Earth, so let us make the best of it and not blow it up or screw it up because we are going to Heaven and Earth can go to Hell for all we care. Is that the right attitude we should take? Ought we? To me, an emphatic NO!

    If we cannot realize a little semblance of Heaven on Earth for our kindred, we are not fit to be stewards of God’s Earth by just promising Paradise as the opium to sedate our daily struggle for survival!

  87. hi i’ m only 17 but i am account of the economical crisis the world is facing:for examples bankruptcy,rapid impoverishment of states, collapse of national societies and higher house values .I think that governments should make arrangements for the sake of reducing this international turmoil because this is plunging whole countries into very financial difficulties. It’s very alarming.

  88. Niang, I am heartened that you are matured in your concern for a mere 17 year old; I was still partying in my hippie days when I was your age!

    Well, times have changed but the needs of homo sapiens for clean drinking water, nutritious food, clothing, shelter, transport, energy, heating etc remains unchanged throughout human history.

    Do not be alarmed about what is going on around you, in Chinese Tao philosophy, the Ying Yang has to come to an equilibrium, so the world economy is finding its own natural equilibrium before it become stable again, and that has to happen by aggregate natural processes: the so called “Wu Wei” or “Sans Actions” or “The Invisible Hands” of the free economy.

    Don’t rely on the government to do anything, they are no gods and sometimes, the more they intervene, the worst the situation becomes.

    Governments are faceless and whether they are put in place through the ballot or the bullet, they face one common problem, they have no money. They merely tax and spend on behalf of the people. When they don’t have enough they literally beg, borrow or steal and that includes the printing and creating of more new money.

    I am assuming you are from an agrarian based nation like China, if so, you will still have your land to provide you and your family your basic survival needs, you will be OK. Woe is you if you have only the desert and oil or buildings and worthless bills: you can’t eat sand, concrete and paper money or drink oil.

    Yes, the New World Order is coming and it has to come, engineered or otherwise but blessed is the man or the woman who keep faith in the goodness of God and goodness of man in loving and bettering his or here neighbor!

  89. I feel that the mortgage crisis can not bring down a whole economy–this mortgage crisis is only causing 10% to 15% of the problem —it has been the deregulation-which started with “Regan” and was been going on since then with Bush allowing more deregulation on derivitives(spelling?)—A great book to read is “The Trillion Dollar Meltdown”-written by a banker. Both sides of the political parties have sold this country for oil rights, and signing the NFTA agreement- the Republican’s wanted Clinton to sign has ruined this country. Who is going to buy all this stuff made in China?–Giving the rich Corporative Exectives more money doesn’t help the economy-they can only buy so many cars etc. Middle class is the largest buyer of goods etc. Does anyone ever ask God what to do-who to run our country-why is it always our egos? Don’t people know that we have repay our Karma-somehow, someway?

  90. i feel that the economic crisis have made the people lead a unluxurious life. we used to buy things that were not very necessary, but now we just buy things to survive

  91. i believe that economic crisis have taught us a big lesson, therefore measures should be taken to avert future occurrence.

  92. The economic crisis has been on the way for a long time. A long series of actions by our government set the course, including going off the gold standard so it could print money as needed; the Community Reinvestment Act and later embellishments that encouraged sub-prime lending; an ever increasing trade deficit; not allowing natural corrections in the economy…whatever caused it, the important thing on an individual basis is to decide what you need to do to deal with it.

  93. Looking back in the early 2000’s the largest worry on most Americans is the war in Afghanistan and Iraq. The cost of war had people worrying about tax hikes and gas prices. Did anyone see this landslide economy disaster coming and how could an economic crisis so significant just appear?

    In retrospect I would say the first instigator of pending disasters started with the deregulation of the public utilities. The fake rolling blackouts of California turned out to be a price-manipulating tactic. Why should the public have to trust a private profit driven business model for modern necessities?

    Did everyone notice that in the early two thousands it seemed that mortgage brokers were instantly everywhere. Even your buddies were doing it, bugging you, “make sure your refi with me old buddy”. I remember thinking. “what the hell”, why, what am I missing. Well, seems that the fees charged to close a mortgage could go from 5k to 50k to do a whole lot of nothing. Nice. The word “stated income”, seemed to be the easiest way to get the deal closed for sure. “Stated Income”, intended statistically for a little higher interest rate acting as profit insurance on the statistical default rate as well as the house value to ensure a solid banking investment. Did people lie about their income to get the loans. All the time. So why didn’t anyone care. Well, weren’t brokers getting paid 5 to 50k for nothing, with a seeming sound banking model backing them up. Oh yah. Actually, most of the times the brokers did all the paper work, filled in all the numbers with next to no input short of names and SS numbers to get the deals closed fast and many. The public is the product, “bring them in buy the truckload, its time to make some serious cash”. This run away business model became the mechanism for high volume loan closing and high profits to brokers and bankers. Don’t forget these broker fees get worked into the loan. So a good part of the fees paid out to the brokers are still owed through the loans and a lot of the public are to this day still in debt to these fees.

    But everything seemed to be going so well. It wasn’t that bad. The model was working. Working families in the US seemed to have achieved a delicate balance with their budgets with their income vs. there debts. Most families were making it. Close but were pulling it off month to month.

    Here comes the landslide. In 2008 the gas prices decides to pretty much double. A few months of this converts higher prices in pretty much all commerce due to the transporting and manufacturing costs. The delicate budgets of millions a families are disrupted. Month after month families attempt to balance out there finances, but to find themselves unsuccessful. For a moment, view the total money circulating in the U.S. economic infrastructure as a full cup of water. When one entity such as an oil company achieves record billions in profits. In other words billions of dollars are removed from circulation and is sitting in a companies account. Sort of like taking a 3/8 cup of the water instead of the 1/8 cup the company usually got. Consequently leaving the rest of the country to pay expenses short ¼ of the money that was usually economically available. If the money is gone, its gone. Simply cant be used if its not there. Simply speaking, the money has been removed from the economy in the form of record fuel company profits.

    Did anyone notice that when you start running out of money, our good old bank friends seem to want to take even more cash than ever? A few checks get returned. Lots of $35 charges. Usually $350 per cycle of 10 checks max the law allows to charge per day. Interest rates seem to really jump missing a payment. What about those 2-year arm adjustable rates, mortgages going from $2800 per month to $4300 per month over a month period. This is the same for businesses. When sales get low, expect tons of over draft charges. It seems way better to run your store with cash daily. Forget writing checks. You’re just being a sucker to the bank system. Even the electronic bill pay system puts a day delay on removing the funds they send out with the hopes of creating an over draft situation. Just clear the checks paid as the store sales and withdraw the cash and operate with cash. Save thousands in fees. Pretty much all bills that are late get ridiculous fees attached, from taxes to utilities to credit debt.

    What is the public to do. We carry the huge burden of ridiculous fees when money gets low. The economic landslide is inevitable in these conditions.

    Problems summery:

    Unstable utility costs
    Unstable fuel costs
    Current banking, finance and insurance systems

    Ronald Reagan really had it wrong when he said, “government regulation is the problem not the solution”.

    A private company should not have the ability to paralyze the U.S. economy single-handedly.

    It is essential to have all critical economic infrastructures government regulated, primarily, Banking, Insurance, Utilities and Fuel Systems.

    I would also recommend getting the economy somewhat a little less stressed and back on tract if it were passed by congress to have one or two months revolving credit debit and mortgage payments deferred if requested by the borrower. It would allow families to catch up with some other bills and get a little more cash injected into the country instead of the bank systems.

    These business systems have the potential for corruption, greed for record profits at the health of the countries expense. We cannot depend on groups of businessmen to act honest and ethical nor should the pubic have to. It needs to be insured by written laws and sustainable by government systems.

  94. the Policeman went to sleep, regulations are there, i think enough of them, but i believe there is a limit to beuraucrancy.

    The greed should be fined, so that would be lenders be more careful.

  95. I haven’t added much to this conversation in a whille but I have been following it regularly.

    Thank you all for your information.

    Perhaps I am reading what I want to read but it seems that the majority of respondants agree that the Clinton Administration’s expansion of the CRA regulations (bad regulation, not deregulation) started this bubble that has now burst.

    The CRA expansions required no downpayment, unqualified, subprime ARM loans which expanded the housing market and (through Frannie and Freddie) infused the international system with bad financial investment products.

    The CRA bad regulations also allowed all banks (even those not being coerced by the CRA community activists) to make bad loans (under the equal treatment provisions of the constitution) and add the bad products to the international financial market pool.

    Everything was fine until the interest rates went up. The bubble was not elastic enough to constrict so it collapsed.

    The “greed” aspect of this problem only exist in the Clinton Administration for influencing the market to achieve power. “Greed” in the private market is misnomer. The market is there to make money, not to be altruistic. Whenever the government stick there nose into the market is screws up the whole works.

    The Obama supporting press doesn’t want to discuss what we all know so we will not see or way out of this for a long time to come.

    The only greed now is the Obama administration “taking advantage” of this crisis to grab power.

  96. Lowering the interest rate and derivatives were the main cause of this mess—a country can not colapse on sub-prime loans—read the Trillion Dollar Meltdown written by a banker. There has always greed on wall street but things were regulated-then basil 2 came into being giving out loans at a 35 to 1 ratio??? We certainly weren’t going to see our way out of this mess if Bush just gave away the money to his corporate buddies–at least Obama has stipulations on the money. Going off the gold standard is the cause of all this is debatable. Moving jobs to China has hurt us big time, plus all the polution the companies have caused! Clinton was working under a republican congress and senate—both parties have sold us down the river for oil. At least most Democrats put “our” money into infra-structure, and it’s not all about big business–(though LBJ-was very crooked in his administration).

  97. How did low interest rates and derivative investments products cause of this mess? This is the main problem we have now. People who don’t know anything about the problem make staements like that as though they are based in fact.

    What stipulations did Obama have on the money. He doesn’t know where the bailout money went. He didn’t even know his own bill provided bounus money to AIG executives!

    Dude, your response is so uninformed it is just an example of how Obama is able to lead you and your ilk around by the ear.

  98. We U.S. Taxes and voter have not forgotten how Barney Frank and his Democratic team on the hearings to do something about Fannie Mae & Freddie Mac. I remember how they said, there was no problem with Freddie and Fannie. We all know how the Democratics Love Ancorn.

  99. The article was written by a liberal. I have noticed how all liberals blame everything on the American Taxpayer. Instead of them being the real problem. Look at the California State Legislators. How those liberals destroyed California enconmy.

  100. I appreciate the post, Pinyo, and I am sorry that you had to go through that dumb crap. However, I must respectfully disagree. Greed, definitely is a factor, and the housing market is a major cause for the crisis, but it is not the only cause. There is no sole cause for an economic crisis or a recession. Some may not think that I am ‘too young to understand any of this’, but writing a research paper on the recession will make a person think about everything at once. By the way, I am using this as a source, I like the article/post. I am not disagreeing because you are a ‘liberal’ or a ‘conservative’ or any of that nonsense, I just have an honest disagreement. I still respect your opinion. (by the way, I am not labeled by any of the above terms either).

    If I were to make a larger point, it would be this: Keep Looking.

    If you are to look for something on google, do not simply use the first link or even the first page. Keep Looking. Especially on this subject. Everyone has their own opinion on why this is happening, some are valid, others are not but the only way to find out is to look around.

    Anyway, sorry for the rambling. My voice is rarely heard, at the very least I can get it read.

  101. Pinyo, you wanted a bigger house in a nicer area and you call the lenders greedy? Did they hold a gun to your head and make you accept the loan? Did they tie you down so you were unable to comparison shop? Don’t blame others for your foolishness.

    • @Matt – Read the article. I didn’t buy the house. I called them greedy because they suggested that I could afford it despite the fact. A responsible lender would simply told me that I couldn’t afford it.

  102. If lending to lower income families was so bad-why didn’t Ronald Regan change this, or Bush Senior or Clinton or George H. W. Bush??? They had every opportunity to change this lending practice–but did nothing because it makes money!! As for the terrorist attack–Bush was warned to do something about Bin Ladin from Clinton but did nothing from what I have read. A free market society also crashes the most compaired to a heavy regulated society—the depression of 1929-now-1980’s and during Eisenhower’s term? Since when in the last 24 years have the democrats had any power to veto anything—we need a balance of both Republicans and Democrat’s in office. Regan started the deregulation, Clinton eased the Glass Stegal act passed NAFTA-Bush/Greenspan did not want any regulation on derriviatives/credit defalt swaps-Alan Greenspan now regrets this decision-and the Democrats didn’t do enough to stop this. What about this country???? Who cares who did what-a bunch of two year olds running this country-both parties have sold us down the tube. We need better qualifications for people getting in to office-not because their a movie star etc. Greed is the word-not making a great nation to live in!!

  103. The problem with your argument is that the banks had no choice but to give out these “bad loans” because as you said, they couldn’t lose anything. It only takes one bank to take advantage of this fact, and the rest are driven out of competition because the one bank chose to take advantage of the circumstances. Do you even wonder why they couldn’t lose anything? Why did those banks not have to worry about their bad loans.

    I’ll give a hint: there was a bill passed in the 2005-2009 senate (Democrat Majority) that forced lenders such as Fannie May and Freddie Mac to buy these bad loans from the banks. Of course the proponents of this bill were thinking they were helping out the people unable to afford huge loans, but all they were really doing was meddling with the balance of risk and payoff in the marketplace. Clearly it was screwed up. Think about it: Why else would banks not have to worry about making bad loans other than government regulations?

    Anyways, as the story goes, the banks buying the bad loans ran out of money, and the first domino had fallen. It is unfortunate that we as consumers feel that big business and greed are going to be the downfall of us all. I think it is part of the human condition to blame the system rather than the lawmakers WE put in place.

    PS: to the guy that said something about a republican president never not causing a recession, please take a government class to learn that it is the legislative branch that makes financial decisions.

  104. Excuse part of my last statement- I was incorrect in saying that the democrats controlled any part of the 2005-2009 congress. I still hold however that the requirement of some banks to purchase “bad loans” was a serious root of the recession

  105. There is no problem with my opinions–I feel your idea only vaguely affected the collapse—Credit default swaps, derivitives and the housing price collapse were the cause-as far as taking a goverment class-they all make the laws- a budget etc. and the president signs it!!! So much for government classes.

  106. People, definitely!

    Because only people have financial and economic worries; animals and probably spirits like angels and fallen angels do not have such problems!

    Seriously, for an insight to the root causes, read this excellent book:

    The Origin of Financial Crisis by George Cooper, First Vintage Books, Dec2008. ISBN:978-0-307-47345-5

  107. I agree that there were many many causes of this recession. Sorry for the miscommunication, I was mainly just adressing the author’s main post.

    Also, the final say of making laws always goes to the congress even if the president veto’s. The congress must approve the budget ect. Congress essentially controls fiscal policy

  108. Thank you Will–I’am not very good with criticism-especially since I have read countless books on the subject-subscribed to newsletters and suffered greatly with this recession(I have a retail business)–Everyone has valid opinions and needs to be heard-it’s hard when you think someone is totally off course with their ideas-but that is how it goes—I just hope that people never have to live through another big recession like now and in the 80’s.

  109. Very good explanation given in laymen’s langaage pinyo. This is very very helpful to understand thisgs. Quite I agree with you. Why should we spend on behalf of greedy bankers. This is ture as far as they don’t retrench their work force.

  110. The republicans are the ones to blame completely. They alone created the entire economic recession which is much closer to a depression.

  111. Wow ignorance is bliss they say…
    Actually Will was the closest to the facts. The Republicans tried twice to increase regulation on Fannie and Freddie and both time were voted down by the Democratic controlled Congress.

    Actually Jerry, if the Democrat’s, such as “Fat Boy” Frank had increased requlation in 05 when the Rep’s were pushing for it much of this mess would have been avoided.

  112. For every “greedy” real estate agent, there tens upon tens of financially irresponsible, math illiterate home buyers.

  113. I am a retired commercial,industrial Real Estate Appraiser who also did appraisals and feasabilyt studies on proposed Residential Subdivisions.For me, it was a no brainer to see that the houses that were being constructed, at least in the area I live, were over improvements for the existing market. The product did not match the demographics. From my understanding, lenders were flush and wanted to get the money out in loans. They apparently were not concerned with HOW but QUICK. Freddie and Fani would purchase these loans and then everything would get spread out in derivatives based on Securitized Mortgages.Never seen anything like this in my lifetime! Nate

  114. i am keen reader of economics.The financial crisis really affected the market much.The financila crisis have been repeating since many years but the 2008 crisis was the worst,however there is no guarantee that it wont happen again.
    I think the economic system followed and imposed is the biggest reason.

  115. I can’t believe so many of you want to blame a political party. They are both crooks, involved in the same hypocracy. Did they all make a ton of money of this at no risk, yes they did. Is it wrong, you bet. Wake up and look at all of them, don’t be a puppet on a string! While we are passing blame, how about the people who knew they couldn’t afford these houses and got them anyway. It’s the same way with credit cards, take some responsibility for your actions if our citizens were not so greedy and had a little more self pride and self control we wouldn’t be in this mess. Everybody from the top to the bottom wants a free hand-out, where does it end

  116. Come on tell the Truth! Their was a perfect storm and what started it was a bunch of speculators who drove the price of oil up!

    YOU CANT MAKE HOUSE PAYMENTS WHEN ALL YOU CASH GOS TO GAS AND GROCERIES!

  117. For or against the government providing money for the relief in the depression 1920-…but consider the economic crisis of 2008-2009

  118. What about the greed of the individual who took out the loans they could not afford just so they could have a huge house. The greed was wide spread not just the bankers. The realtors, individuals, builders, and the banks were greedy. Also the government created Fannie and Freddie so they also played a role in this crisis.

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