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AnswerWhile the mortgage crisis is a major underpinning of this situation, one cannot blame it only on the people that could not afford their mortgages. The fact is that lending was liberalized by many institutions that were not properly regulated. In 1999, Phil Gram - chairman of the Senate banking committee pushed through a historic banking deregulation bill that decimated Depression-era firewalls between commercial banks, investment banks, insurance companies, and securities firms-setting off a wave of merger mania. But Gramm's most cunning coup on behalf of his friends in the financial services industry-friends who gave him millions over his 24-year congressional career-came on December 15, 2000. It was an especially tense time in Washington. Only two days earlier, the Supreme Court had issued its decision on Bush v. Gore. President Bill Clinton and the Republican-controlled Congress were locked in a budget showdown. It was the perfect moment for a wily senator to game the system. As Congress and the White House were hurriedly hammering out a $384-billion omnibus spending bill, Gramm slipped in a 262-page measure called the Commodity Futures Modernization Act. Written with the help of financial industry lobbyists and cosponsored by Senator Richard Lugar (R-Ind.), the chairman of the agriculture committee, the measure had been considered dead-even by Gramm. Few lawmakers had either the opportunity or inclination to read the version of the bill Gramm inserted. "Nobody in either chamber had any knowledge of what was going on or what was in it," says a congressional aide familiar with the bill's history. It's not exactly like Gramm hid his handiwork-far from it. The balding and bespectacled Texan strode onto the Senate floor to hail the act's inclusion into the must-pass budget package. But only an expert, or a lobbyist, could have followed what Gramm was saying. The act, he declared, would ensure that neither the SEC nor the Commodity Futures Trading Commission (CFTC) got into the business of regulating newfangled financial products called swaps-and would thus "protect financial institutions from over regulation" and "position our financial services industries to be world leaders into the new century."

It is not the poor people that we have to worry about, it is the predatory unregulated investors and investor banks and their new rash of "products" that we basically without value, yet allowed to be traded in the dark that caused this crisis.

I would rather loan money to a poor person that had an interest in a property - a home. Than I would to a bunch of rich white guys on Wall Street that rolled the dice and lost and yet we all get to pay for it......

AnswerThe causes of the current economic crisis are much more profound than gas prices or mortgages. These are symptoms. The real problem is that the wealthiest class has seized control of the government and the economy.

See the related question below "What is the main cause of the current economic crisis in the US?" That question also links to another question that deals with the adverse economic impact of the Income Tax. It is a vehicle for forced redistribution of wealth.

Answer:the inability of any of the big shots in Washington to convince bush that the war was adversely affecting our economy and his inability to understand what they were trying to tell him. don't forget he thinks he's doing a great job.

The war isn't the only thing causing this. As far as him doing a great job, maybe and maybe not. Take a look back to the Clinton administration and see if it didn't start there before you go assuming you are an expert. I realize and understand that this is just opinions and everyone has one but BUSH isn't the only one at fault. Here's a concept....We all re-elected him (you are an idiot if you believe that, not everyone voted for bush ever, so if you want to stick to this concept, you really are trying to pretend that nothing is happening, and no the person who wrote this paragraph is not writing this:-)). Also, get over the price of gas because if you do your research you will find out that he doesn't set it without approval from Congress. Yeah and we should also blame the board of economic advisers, wait to go guys. I think everyone wants to fire you.

Actually people, you are both wrong, this is all started with Reagan, not Clinton or Bush, so we all have Reagan to blame, and no we did not all re-elect him, only the stupid republicans who don't understand that we are killing the earth, so no you can't blame one person for this, but you can't blame the entire United States of America, not everyone voted for bush or Reagan or Clinton. So there, if you have anything to top that, I'd like to see it, and plus republicans and democrats alike have all done something wrong, some more than others, but the only way to fix this is to work together, we all learned this in preschool, and it is time to put it to use, team work.

AnswerThe economy has nothing to do with the war. As for gas prices, they have had somewhat of an effect on the economy, but gas prices would be a lot higher if not for the war.

The problem that led to the bailout is that, during the Clinton administration, the federal government passed laws that forced lenders to loosen the requirements for people wishing to borrow money to buy homes. The intent of these laws was to make housing more affordable for low-income families, because liberals love to feel like they are doing something good for poor people. But liberals, in general, don't understand economics. And they don't believe in the law of Unintended Consequences. And it bit us all in the butt.

Banks relaxes their standards for issuing mortgages. All of a sudden, people could get loans without showing proof that they had the ability to pay them back. Suddenly, there were a lot more buyers in the housing market (more demand). But there was no corresponding increase, at least not in the short term, in the number of homes available (supply unchanged). The forces of supply and demand caused prices of homes to go up. For a while, this somewhat slowed the growth in demand. But then the lenders figured out ways to get around it. Like adjustable-rate mortgages, interest-only mortgages, and no-down-payment mortgages. So, once again, anybody with two pennies to rub together could buy a house, and demand was back up again.

Meanwhile, housing prices continued to soar, and developers, eager to take advantage of the situation, were building new homes left and right to catch up to the demand. There was a lot of money to be made in the market. Eventually, the supply caught up to the demand, and housing prices stabilized.

But, at about that same time, people started defaulting on all those mortgages that never should have been issued in the first place. They didn't have enough income to pay the note. If the lenders had bothered to check, they would have known this, and wouldn't have issued the loans. But they were under pressure from the government to ignore things like that.

So the lenders had to start foreclosing on all these mortgages. The problem is, by that time, prices had started going down. You see, because the developers had worked their tails off to catch up to the demand, there was now a surplus of homes on the market. This forced prices down. So, if a lender forecloses on a mortgage worth $200,000, taking a house that is now only worth $150,000, the lender loses $50,000. That's if the lender can turn around and sell that house for $150,000. But in many cases, they couldn't. Why? Because the lenders had finally figured out that lending money to people who couldn't afford to pay it back was a bad idea, and weren't issuing nearly as many mortgages anymore. So there just weren't enough buyers out there to buy all these foreclosed homes. And the prices continued to plummet. So, in many cases, the lender either just held on to a home that was continuing to decrease in value, or sold it at a rock-bottom price to some investor. So all the lenders started going bankrupt.

All of this happened because the liberals in the federal government wanted to help out the poor people. But it didn't work. Now the poor people are homeless again, AND have a bankruptcy or a foreclosure on their credit history. And now, the "solution" is to give the federal government more money, and more power, to help out the poor people. And that won't work either. There are only three ways to raise the money for this bailout - taxes, borrowing, and printing money. Higher taxes, well Obama will see to it that only the "rich" pay more taxes, but what he doesn't understand is that the "rich" are the ones that are providing all the jobs that the poor people need, and they won't be able to provide as many jobs when their taxes go up. Borrowing will drive up interest rates, making it even harder for people to get loans. And printing money will drive up inflation, making everything we buy cost more. All of these will hurt the poor, not help them.

Given that government interference is what caused all this mess, doesn't it make sense that the best solution is to stop interfering?! On some level, I believe the government should fix the problem, since the government created it in the first place. But the problem is that the government is incapable of fixing the problem. In the history of this nation, there has never been an economic problem so bad that it could not be made worse by government interference. In most cases, government interference is the problem. And then they want to fix it with more government interference. Say "no" to government interference in the economy.

who said anything about the price of gas? the fact of the matter is that the war in Iraq has cost $500 billion so far another year and it will pass the$700 billion spent to bail out the banks and other huge corporations. this war started with george daddy ended with Clinton and was picked up by george son his first concern was getting Saddam after 9/11 not Osama. with all the covert operations this country has employed over the years people in the current administration can't find a middle eastern who is well over 6 feet tal and needs dialysis?

Answer, Additional info for the answer above.

Besides banks being "encouraged" to ofer mortages to borrowers who couldn't provide proper documentation, the Federal Reserve Banks issued guidance to the banks that basically told them this: You will lend money to those who cannot necessarily afford it, you will spend more time and hire more staff as necessary to facilitate subprime lending. As a bonus, Fannie May and Freddie Mac also threatened banks that if they didn't balance their loan portfolios (balance in this case meaning, you better be lending more as a percentage to subprime borrowers than previously) that Fannie and Freddie wouldn't be purchasing the loans (thus shutting off one of the resale channels for mortgages). Fannie and Freddie were saying: "Write the loans, even if your normal lending guidelines are violated, who cares, we'll buy it from you". Lovely. The problem was further compounded by the guy who ran Freddie and Fannie (Reins I think is his name) who received bonuses based upon rebalancing the portfolio of loans to lean more towards subprime (Dems call this helping the under represented). Basically we have the guy in charge having the personally enriching goal of driving lending to those at higher risk of default. This is converse to sound, long term viability for a company. Banks have always maintained subprime loans, but they balanced those with lower risk loans. The way Gov't handled this with fannie and Freddie threw comon sense out the window and was the recipe for the current mess we are all having to pay for. Coupled with criminally negligent, almost ignorant oversite provided by Congress (as recent as 2 years ago, the Dems were lauding the performance of Freddie and Fannie. Oops.

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