http://www.youtube.com/watch?v=1RZVw3no2A4

http://www.youtube.com/watch?v=Z5z9lD4C2Io&feature=iv&annotation_id=event_313445

http://www.youtube.com/watch?v=ivmL-lXNy64

http://www.youtube.com/watch?v=ivmL-lXNy64

http://www.youtube.com/watch?v=_MGT_cSi7Rs

Question, please? Isn’t it true that the “disinformation” on the source of the crisis will also lead to solutions which will also “set us up” for more of the same in the future? If so, do you have any ideas on how to stop it–or, at least, minimize the personal impacts?

“The Financial Crisis Is About Fear, Not Greed”

Im sorry Nick, I think you are making the classic mistake of looking at the result and not the cause.

You are right, this crisis isnt about greed. This crisis is at heart about what happens when true Charity is replaced by false charity. In it’s soul it’s about a false understanding of God’s Law and Will.

That being said, having some experience in financial markets, you are right that slaying fear is critical to ending the crisis.

What scares me is the tremendous amount of dis-information be put out regarding the source of the crisis. This dis-information is leading to solutions which are not solutions but rather seeds which in the future will lead the US to moving further away from Our Lord.

VCDA
Knight

Fear? I think not…

1977: Pres. Jimmy Carter signs the Community Reinvestment
Act…..”

Where did you get this information, it would have been nice to see references.

Just to be clear, I agree with you 100%. I am not ignorant of financial markets and have been trying to explain this to friends for over a year.

I can be emailed at hcsknight@yahoo.com if you have info that’s too large to be posted.

Thanks

RE: October 10th, 2008 at 1:58 pm – “How could cheap inner-city housing be causing all of this trouble? What about the $300,000++ homes in California, in all of those areas plagued with foreclosures?”

Shar, the explanation is found in what’s commonly known as “the law of large numbers”. Yes, there are the $300k homes in California. But the $300k number few compared to the sub-prime homes.

If you doubt the possibility of this consider taxes. Roughly 10% of the filings pay 70% of the Personal Income Tax paid. To bein this top 10$ you have to make an Adjusted Gross Income of $108k. {http://www.ntu.org/main/page.php?PageID=6, they use IRS data}

So, that leaves 90% of the potential home buing population buying houses based on a $108k salary or less. So if you add up the number of less than $300k homes by their value the number you get will be much much larger than the number you would get if you added up all the greater than $300k homes.

Now take this larger number, the sub 300k homes and leverage against them and it becomes even larger.

That’s the seed of the problem. It was not created by greed, it was created by false charity. By forcing banks to make bad loans, bad business decisions, under the name of “fairness” and “the American dream” of owning a home. Everything else that comes after is simply the fruit of trying to make up for the fundamental wrong of forcing a business into charity work. All of it.

IMHO the Democratic party is the source of this situation simply because their ideology IS the seed. Banks were forced by CRA and Democrat initiatives to make loans to people who banks knew, on a business basis, were to risky. Yes as this seed grew it produced fruit that pulled in the fallen nature of Republicans, but for now Im pointing out what so much of the media does not. It is the media {ABC, NBC, CBS, CNN} painting only part of the picture that IMHO has lead to so much of the confusion on the part of the American people.

So AFTER the banks were forced to make these loans they turned to Wall Street for an answer to the question “how do I get these loans off my books”. Wall Street came up with “securitization”, Mortgage Backed Securities {MBS}. If you cant picture an MBS, think of a mutual fund invested in stocks in all the same sector – say autos. Now instead of auto sector stocks they are all home mortgages. The concept of securitization is really that simple.

It’s where Fannie Mae {FNM} and Freddie Mac {FRE} came into the picture; they played very very prominent roles in “packaging” the MBS’s. They created more of these than anyone else.

Since US homeowners so infrequently defaulted on loans, credit agencies gave AAA credit ratings to the MBSs. What are the implications of a AAA rating? The first is called “leverage’, the second is a form of leverage called insurance. The ratings made the MBS’s look safer which lowered insurance taken out against an MBS default and allowed more leverage to given against the MBS asset.

Dont get hung up on the ratings per say. Some MBS were rated AAA, some Aaa, some BBB, etc. Each lower rating simply means less can be borrowed against the asset and insuring the asset costs more. What is important to realize is as housing prices dropped, so too did the credit rating on the MBS’s.

Now, to put this all together.

I want you to think of a triangle of dominoes. Think of each domino being a mortgage. Now think of a very large triangle of dominos, the size of a gym floor. One of these super-sized triangles is a MBS. The majority of the triangles are not sub-prime. But there are enough in most of the triangles that there’s a pretty good chance the right ones falling bring down the whole triangle. Now go somewhere in the middle and tip one over towards the widest part of the triangle… Tip another over towards the narrow part… You wont take down the whole triangle but you will take out a whole lot.

Now think of these triangles being linked together by business transactions. If you lend money to someone who’s triangles have too many bad MBS’s, and they go under… You dont get your money back…. And you go under. This is why the “credit markets” arent lending.

Oh yea, that leverage thing…. These triangles, because they were rated so high, were borrowed against. And the money borrowed, it wasnt put in the bank. They didnt buy gold with it. It was “invested”.

And what about “Lunch bucket Joe”….. Well he took out a home equity loan and made his life materially better… In short, he did EXACTLY what the “Wall Street” types did.

The only real difference between the Wall Street types and the “Lunch bucket Joe’s”. The Wall Street types did it with bigger numbers.

What’s truly sad now. The classic display of a “democratic mob” mentality. This is EXACTLY why our Founding Fathers founded a Constitutional Republic. NOT a Democracy.

There are grave dangers assailing our country right now.

The gravest ones are NOT financial.

Marcy, I want to thank you from the bottom of my heart for all your hard work in putting together your timeline. I’d read all that info in various places and at various times, but hadn’t the time (or, imagination, to be honest) to thread it together. I am copying your well-organized data, and will use it liberally in the next 23 days. If you want credit (no pun intended) for it, I’ll gladly give it but will need your info. If you’re willing to give it, let me know and I’ll give you my contact info. Thank you!

Finally, I want everyone to know that God is watching out for His people–often in left-handed, hilarious ways. Hubby is one of those “big spenders”, and after declaring bankruptcy, we’ve been forced (thank You, Lord!) to live on what he makes. With nothing to fall back on, we lost an overpriced house in a dying city a year ago, and are living in a mobile home that cost 1/4 the price in a “living” city. It’s “hand to mouth”, now, but at least the coming disaster isn’t going to impact us as much as it would have. Praise be to God!

Here is the logic. The logic was that access to credit would help cure poverty. If less-qualified borrowers could get loans, home ownership among minorities would increase. In fact they promised in campaigns that making more credt available to minority businesses and lower-income people would be something they would do. So that was the policy-setting.

The regulatory part was by the feds setting quotas for how many high-risk loans every bank had to provide. Banks that didnt play along were fined, or their merger/aquisition plans would not be approved.

Barack Obama worked for law firm that sued banks for no providing loans to high-rish borrowers.

The Democrats set up Freddie Mac and Fanny Mae to secure the bad paper they were forcing the banks to create.

A few years ago the Republicans tried to warn about this — including McCain — and they wanted to pass laws to rein it in, but the Dems controlled congress so they couldn’t. And of course every time they tried to do so, they were accused of being against the poor.

The problem is the everyone forgot the proverb: The borrower is a slave to the lender.

The CC problem is beyond comprehension. I cannot imagine people having 30, 40k or more in CC debt. Greed, weakness, I don’t know — it sounds like insanity to me. How do they ever sleep? I think I would die of sheer nervousness if I had to live with that.

What I’m perplexed about is how everyone seems to think the whole economy is tanking because a few big banks are failing. There are lots of other industries and lots of small businesses who are mostly going about business as usual. I work in the IT industry and while we have definitely seen some slowdown, it’s hardly at the rate that the stock market seems to be tanking. So I agree that fear and a herd mentality seem to be pushing much of this.

Also, the bailout seems to have done little to ease fears in the stock market. Can we take it back since it hasn’t really done any good anyway?

Amen!

The reason for the timeline is that I was asked to defend voting for McCain if I wasn’t swayed by the abotion so I did lots of research, printed out their respective voting records (love your nod to obama’s stay in the cloak room!) and even with abortion off the table it seemed more than obvious to me how I would vote, even if I weren’t a Catholic. I thought the information was so worthwhile that posting on this article seemed perfect. And I sure came across all you’ve mentioned as well (Acordn, Moveon.org etc.).

Yikes.