Overnight, the sub-prime housing market and credit crunch have brought the economy to its knees, with the government having to step in to lower rates and pump money into the economy. All the experts are on the tube and radio trying to reconstruct what happened. The Baltimore Sun has an excellent piece this morning on the subject.
I can tell you what happened in much shorter and easier to understand sentences. Here we go:
- Big banks are controlled by investors. Investors like to see loan activity. After all the possible lending to people with good credit took place, investors got restless. Why not start offering money to people who shouldn't be able to qualify for credit? We'll cover ourselves by charging more for the money!
- Credit card companies were giving out cards to anyone with a pulse, then charging them close to 50% interest when all the fees and charges are added up. Companies can write off the bad debt, so who cares?
- People who live paycheck to paycheck with no savings miss mortgage and credit care payments when they run into a hardship.
I hope the 2008 presidential candidates wake up and smell the coffee. The banking industry needs to be cleaned up, and soon. The American people are not ready for another S&L bailout.
Comment Preview