One type of fraud. There were people who would buy homes, have the houses over-valued, then sell them to people as investment, who didn't know the true-value of the home. These victims had their credit ruined, and the bank was stuck was houses where the loan value far exceeded the value of the house.
Speculation and bubble. People where buying houses as investments, hoping to "flip" them other investors in months. At each "flip", the loan value increased, putting the true value of the property out-of-sync with loan value when the bubble popped.
Speculation and over-buying. People would buy houses on low-interest, adjustable rate loans with minimal down-payments. These people may or may not planned to live in the house. They expected the value of the house would increase before the adjustable rate kicked-in, and they would sell the house and pocket the difference in appreciation.
Over-buying and wage inflation. People would buy more house then they would normally could not afford. These people hoped that their future salaries would be able to cover the increase in payments when the rate-increase kicked in. In times of high inflation, this is a normally a sound plan.
Fraud in loan agreement. People would be sold deceptive loans by brokers. They were unaware of the consequences of adjustable-rate loan. These people planned to live in home and where not planning on future income increases. Some where told to exaggerate their income or the brokers exaggerated the buyers income or forged document's. Brokers gained through fees generated.
OK, these are the ones I can think of. Any more?
Thursday, September 18, 2008
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The underlying cause of the current crisis was the election of Reagan in 1980 and electing a majority of Republicans in Congress and the White House since then. It's very simple, Republicans killed all the regulations forcing investment banks to limit their risks with other people's money, they killed the seperation of savings banks and investment banks so people had no "safe" secure place to put their money, now all banks take too much risk. Republicans put former investment bank CEO's at the top of the SEC and Treasury, so corruption was bound to happen...their theory was corrupt speculators could better regulate themselves...sort of like the Robber Baron Monopoly theory or trickle down theory.
Americans have two choices elect a Republican where you have a 98% chance they're going to screw you or a Democrat where you have a 50% chance to get screwed, at least since the Democrats have moved to the left a little after Clinton Bush (it used to be 75% with the Dems).
However since Obama comes from the far left side of the Democratic Party (though Obama would be called center right in Europe)we have a chance with him we won't get screwed too much, at least with him will finally have someone smart in the White House who seems to really care about the middle and poor classes and not just the rich.
If McCain wins pull all your money out of the bank and hide it under the bed or spend it fast cause the nuclear terrorist attack and nuclear war won't be long coming.
You live by the gun you die by the gun. Americans live by the gun when they vote Republican.
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