I know I've heard the term "redlining" how does this relate?
An excess of vanity posts sucking up liquidity?
Look up CAR, Freddie & Fanny, etc., etc. There are plenty of threads right here to fill you in.
Short answer: Congress.
In their own words...
At this 2004 Congressional hearing, Democrat leaders dismissed the calls for the reform of Fannie Mae and Freddie Mac. They later killed legislation that would have reformed these entities.
http://www.youtube.com:80/watch?v=_MGT_cSi7Rs&eurl=http://gatewaypundit.blogspot.com/
This explains it all.
More to it than just this but...In a nutshell, clinton threatened banks for being “racist”. It could not be that many inner city folks had bad credit and therefore could not get loans..it had to be racism. The banks were forced to make subprime loans and what do you know...low income people had a hard time paying them back. Thus it is all the republicans fault.
No article, no contribution, nonsense.
A lot of things did. For example:
The oil price shock wave going through the economy. That was probably the final straw that tanked a number of weak financial institutions.
The failure of Freddie-Mae and Fanny-Mac financial institutions. These government backed institutions were not backed with enough capital. So when the housing prices fell and the markets when south they were the first to sink.
This was in turn caused by our corrupt Senators and Representatives who set the rules for these institutions so that they could profit.
See the mandatory community reinvestment acts and ACORN.
Reportedly these rules required banks to invest a certain amount of money with low income people and neighborhoods (defeating ‘redlining’) or pay hefty financial penalties.
These rules caused the banks (backed by Freddie and Fanny) to issue a lot of bad loans - to people with no income and no jobs (nija loans).
You will also want to check out the securitization of mortgage, the FASB "Mark to Market" rules on valuing assets, and the developing of Credit Default Swaps.
What is the root cause of this crisis?
Banks making bad loans.
“Obama was a key player in the lawsuit that started the government on a course of forcing lenders to give more loans to those who had poor credit. Lending companies were forced to come up with imaginative ways of fulfilling the quotas that were required. Sub-prime lending was born as a result. The mortgage crises was forecast by many who were able to look beyond the quota. Buycks-Roberson v. Citibank Fed. Sav. Bank”
(http://www.freerepublic.com/focus/f-news/2091975/posts)
Greed, pure and simple. Greed on the part of the borrowers, who thought they could get something for nothing. Greed on the part of the mortgage brokers, who wanted to keep the fees rolling in regardless of the creditworthiness of the customer. Greed on the part of the investment banks, who packaged and sold the mortgages without pricing them in properly to reflect their risk. Long and short none of the people participating in the fiasco are innocent.
An incredible combination of greed and stupidity.
bump
But, at the very heart of this problem is our centrally planned monetary system and our banking cartel.
The monetarist economists running the Federal Reserve believe that they're smart enough to predict the economic actions of 300 million people. (Or should I say billions of people, given the new global economy we live in?)
They use their charts and computers and their mathematical models to predict how much money they need to inject into, or remove from the system in order to keep the general price level constant, or growing at a reasonable rate.
The problem is, they mess up sometimes. The housing bubble was enabled by the Greenspan fed's leaving the money spigots open for too long after 9/11.
The easy money essentially fooled a lot of people about the true cost of money, and that led to the bad investments that are clogging up the system now.
I know this sounds like a conspiracy theory, but it's all true. I wouldn't have believed it myself had I not started researching this a few months ago, as I watched my financial stocks tanking. I wanted to know what was happening, and now I know the whole truth... it's quite simply a failure of central planning (exacerbated by several other bad government decisions).
My recommendations to all FReepers is to educate themselves on economics - particularly the Austrian theory of the business cycle (yes, this is what Ron Paul keeps talking about.) The Austrian economists, in my non expert but reasoned opinion, are right... and the monetarist economists running the fed are wrong.
That's why we're in this mess. The monetarists are following a false theory.
Learn more here.
(Warning... you won't like what these libertarians say about the war, but please don't hold that against them. Read what they have to say about economics and decide for yourself. IMO, they're right.)
B-U-M-P everyone’s accusing me
...if the Feds say you must make loans in certain neighborhoods in order to stay in business and we will buy those loans.... bingo.... EVEN BANKERS CAN FIGURE OUT THE GAME PLAN...
Following the problems in the financial sector in the UK and USA, uncertainty has now hit Japan.
In the last 7 days Origami Bank has folded, Sumo Bank has gone belly up and Bonsai Bank announced plans to cut some of its branches.
Yesterday, it was announced that Karaoke Bank is up for sale and will likely go for a song, while today shares in Kamikaze Bank were suspended after they nose-dived.
While Samurai Bank is soldiering on following sharp cutbacks, Ninja Bank is reported to have taken a hit, but they remain in the black.
Furthermore, 500 staff at Karate Bank got the chop and analysts report that there is something fishy going on at Sushi Bank where it is feared that staff may get a raw deal.