OK, people, is there a concise, no jargony way to explain this financial crisis

and the measures taken to "resolve" it? I mean something that can be disseminated which will get across to those who don't understand the world of high finance what has happened to this nation and to them? Then can it be tied to change in the election? I can't formulate something like this because I don't understand the much more than the effect of bad credit on the situation. There is a whole lot more about trading and debt linked to investment that I don't understand. Are there some of you who are willing to work jointly on a cribsheet of some sort that we less literate can use when we speak with others?

the hand deceives the eye. Whatever the structure was of this fraud I'm sure that fraud has occurred. For the benefit of anyone who doesn't know how to define fraud as opposed to bad business the former is malicious intent to deceive.

A bunch of people had a lot of money to loan.
They decided the best way to make more money was to loan it to people to buy houses.
The people who borrowed the money bought over their income ability and could not pay back the loans.
The companies who bought the loans are now in trouble.
We the tax payers have to loan them money to keep them from going bankrupt.
It all happened when the Republicans were in control of our government.
End of story for now.

those who loaned the money could basically lie and make up anything they wanted to, to allow said potential home owner to sign off on a contract that was presented to them in a fraudulent way.

After which, these loans, known as subprime loans (because they were let to people that had a subprime credit rating), where then bundled together and sold to banks, who then sliced them up into Tranches (sp). These Tranches (sp) were then offered to the wealthy as good investment vehicles to basically make free money. It was based on the fact that over time, the majority of the people paying off the loans would actually pay them off and then generate interest for the wealthy investors.

However, the the subprime lenders committed a lot of out right fraud. Some with the knowledge of the people borrowing the money and some that didn't(actually most had no idea they were being duped).

Now these fraudulent loans were Adjustable Rate Mortgages. That means every one of these loans resets periodically as per the contract specifies. Some people who got these loans were out right lied to when asking if these loans were fixed and or if they would reset.

So several months would go by and what would appear as if being out of the blue, the interest rate would reset to a higher rate. Most of the times it would drive up the monthly mortgage amount to the point that the person, who took out the loan, could no longer pay.

When you have enough of these, the Tranches (sp) investment vehicles that the rich invested in, become basically worthless.

The Tranches were based on the fact that if you bundle together both high, middle and low risk, in the end, the wealthy could make a load of money on basically imaginary money. But there was a catch. What if all the loans defaulted and all the people who took out the loans either declared bankruptcy or had their house foreclosed? In normal times, it would it would work, but somewhat like geometric progression, when more of these loans when out to subprime credit risks, it started as you will "a run" on investing in real estate.

Because, the subprimes made it really easy for anyone to buy a house, so some people were buying as many as a dozen condos, in hopes of flipping them to a higher return.

The problem here was, so many people who took out mortgages on these houses and condos, didn't have the income, purposely lied on the application with the lenders okay and bought to much then they could ever possible afford. So there was a glut of unsold houses priced beyond normal realms.

So when people started defaulting on their mortgages and going into foreclosure, the value of the houses went down, because the demand for homes stalled and dropped due to not enough prime holders of credit.

So those who had homes valued much beyond what it was actually worth, found themselves "underwater". Meaning, the house was worth vastly less than what they paid for it.

People walked away, foreclosed and declared bankruptcy. And the Tranches, basically became worthless. When the tranches became worthless, this meant that the capitol that the investing banks were "banking on" to support the tranches vanished, because it was never there to begin with.

Banks were suddenly scarily short of capitol. Banks began to fail because they couldn't fulfill their obligations to their investors.

And to make a very very long story short. The deregulation of the banking and real estate industry made this all possible.

And thus began the great new regression.

I know this wasn't sort and sweet and I probably repeated myself a few times and I maybe slightly off in my logic, but that's basically it.

Deregulation and privatizing are central to the modern GOP belief system. The biggest corporations got their GOP friends to repeal the laws and regulations that had protected the average American for decades. This is all a direct result of that.

It wasn't a case of bad luck, periodic business cycles, or even "shit happens". The crooks got the GOP to fire the cops.

The simple explanation is that Reagan came in 30 years ago and cut the bank examiner force by 75% which led directly to the S&L crisis. The "Reagan revolution" people, which includes McCain, have fought vigorously and systematically to remove barriers and government oversight. These barriers and regulators were in place to protect the integrity of the financial system so the average person would have a fair chance to end up with some money in their retirement account.

By eliminating these protections, this invites the crooks to put this money at extreme risk, and that is exactly what has happened. It should not be a surprise to anybody. Put a huge pot of money out for the taking without any police around and it will be gone before you know it.

The solutions aren't that complicated. We simply need to put those protections, regulations, and firewalls back in place. In the process, the regulations should be updated to match today's economy, but fundamentally the issue is q simple question of whether our financial system should be on the honor system or do we need police.

There is one other issue we must also address. We have heard a lot of the "too big to fail" argument. That is bullcrap. If we have to bail out crooks and incompetents because they are "too big to fail", then we need to put restrictions in place that never allow any single institution to become "too big to fail" ever again.

people were making money in the short term, and refused to look at the long term implications of owning loans that were doomed to be foreclosed on. Everyone knew the day was coming, but couldn't ignore the short term profit.

This is old, history is full of such things. This time it's "derivatives" and "flipping real estate", in the twenties it was "watered stock", in the 1990s is was IPOs, the list is endless. If you want to get really, really rich without doing much work, you have to find a way to sell nothing for a high price.

Just throwing this idea out there to try to understand why the market needs at least some regulation in order to survive: Financial entities which grow in a totally unregulated manner will eventually overextend themselves and bring their neighbors down with them, like the way uncontrolled cell growth can ultimately kill the host if unchecked.

Am I on to something here, or am I off base?

nt

n/t :thumbsup: