“A Pale Green Mermaid Blog”
I could be wrong, but as far as I can see from what I have read and heard ,
it is the so called “New Instruments ” ( investment products that were sold to the public by banks) that are the problem,
because they have produced the ever popular “Toxic Assets ” which no one wants to buy,
Now the toxic assets are investment products that are no longer producing income
now why aren’t they producing income? because the new investment products used for collateral, mortgages,
but they sold mortgages to people using predatory lending practices as used by credit cards, these practices we are all familiar with, one mistake and your payments balloon and there are fines and fees all over the place.
then they stuffed all these mortgages, sometimes 200 , into the new investment products
1.these investment products were not regulated by the Bush administration, they ignored rules on the books at the time, and also loosened existing lending practices .
2. A ponzi like scheme was produced where everything worked so long as the banks could keep selling the products to investors.( and with the lax lending regulations it was endless)
3. when the housing bubble broke, as the banks knew it would, the scheme fell apart
4. as home owners started missing payment their fees and monthly payments skyrocketed
but instead of refinancing the mortgages at a lower rate that the owners could afford the banks refused and are still refusing to accept the lower income from the new instruments, they would prefer to be bailed out by the government .
The big investment banks created the faulty investment products and should take the hit for selling the public risky investments.
they should start refinancing the mortgages for all who can afford to pay 1/3 of their income in monthly payments, so owners can retain their houses. ( this will slow if not stop the downward spiral we are in)
Currently the large investment banks are refusing to lend or refinance except in a few circumstances.
The chicken or the egg? I think it is the chicken i.e. the NEW BANKING INSTRUMENTS that caused the problem – these practices should be outlawed.
Saving the homes of our fellow citizens is the first step in what will be a long process… a commentator on NPR said there are not millions of theses toxic assets but trillions!
As Sheila Bear said “it’s the mortgages stupid.”
Let’s hope for some Peace and economic justice.
Note: Sheila Bear , F.D.I.C .Chairman