Mortgage News: Ultimately, leverage flipped the economy
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Mortgage News March 20th, 2008Raise your hand if you do not quite understand this whole financial crisis.
It has been going on for seven months now, and many people probably feel as if they should understand it. But they do not, not really. The part about the housing slump seems simple enough. With banks whispering sweet encouragement, people bought homes they could not afford, and now they are falling behind on their mortgages.
But the overwhelming majority of homeowners are still doing just fine. So how is it that a mess concentrated in one part of the mortgage business — subprime loans — has frozen up the credit markets, sent stock markets gyrating, caused the collapse of Bear Sterns, left the economy on the brink of the worst recession in a generation and forced the Federal Reserve to take its boldest action since the Depression?
I am here to urge you not to feel sheepish. This may not be entirely comforting, but your confusion is shared by many people who are in the middle of the crisis.
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