On the subject of “The Giant Pool of Money”

I listened to the NPR program, “The Giant Pool of Money”. Recorded in 2008, this is my second exposure and understanding of the crisis. The finance and economic principles discussed are very heady and sophisticated. Very intimidating. “Above my pay grade,” as Mr. Obama has once said ( quote is taken out of context, FYI). Coincidentally, I just recently watched the movie The Big Short. The movie is centered around a handful of people who saw the housing bubble and its impending crash. Because of their keen insight their foreknowledge enabled them to profit by making credit default swaps off faulty mortgage loans.  The financial practices of CDO’s, NINA loans, and others that created the “housing bubble” were explained in a clear and coherent manner in the movie. The movie was enlightening, however, it didn’t explain the whole story. The podcast is a great compliment to the movie and goes more in depth.

One quote that is a continual theme of the effects of the housing bubble is said at the beginning of the program, “I can’t have a future. I will fail after a while.” That’s the saddest part of this economic crisis: Wall Street steamrollered the inevitable default of mortgages of hardworking Americans. Their dreams of owning a house became a fleeting reality and transformed into a bankruptcy nightmare.

When I think about who is at fault in this I can see irrespnsibility on both sides, the applicants and bankers. Bankers for approving the loans and being driven by enormous amounts of monetary incentives. For example, giving loan approvals upwards of 400,000 dollars to an applicant that makes barely 35,000 is crazy. In the podcast it was said that to qualify for NINA ( no income verification) loans people just had to have “some kind of credit score and a pulse”, that’s it. ON the other side, were Americans irresponsibly overestimating their potential to buy a house that was way out of their price range? Mortgage brokers sought out these low income families and offered the hope of the American Dream.

Whats so appalling is that after the reprehensible actions of the bankers we bailed them out. They then paid themselves millions of dollars in bonuses with the money. They never became accountable for their actions. Only one banker out of all of them did face conviction in the end. Has anything changed? Is there new and mandatory regulations? No. Its happening again. The Obama admin is encouraging banks to approve sub-prime loans again.

This is all  very discouraging. I don’t see where the accountability is in all of this. And wealthy people became more wealthy while the middle class is left suffering, doomed to fall to the next lower economic class. More broadly, I see this information as the total undoing of the promised American Dream. Its loosing its allure. Owning a big house, getting an education to make a secure living for oneself…it seems as if it could all fall apart and the individual could lose everything they worked for. Whose looking out for the citizens? Will I have a future in America? The government cant guarantee this. Its very hard to trust these institutions on Capital Hill. Their actions are making them look like thieves.

 

 

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