Re: the "R' word
Ok but Alan Greenspan lowered the interest rates precisely so that people can purchase their own house. The whole reason behind lowering the interest rate was so that people can realize their 'right to own'. Very flawed thinking indeed!
Also, why were the mortgages packaged into securities? Because that's the plan investment banks had come up with. I mean why couldn't we have a normal mortgage payable to the lender, in most cases your local commercial bank or any local mortgage lender. That's how mortgages were given out in the past before I-Banks came up with this scheme to profit off of the mortgage money. Why was each mortgage made so complicated and packaged into several small securities? Why was it given an unreliable credit rating and an equally unreliable insurance (Of course for that S&P and AIG are to be blamed). I understand the taxpayers who bought the houses beyond their means were stupid and greedy to jump on the bandwagon and not think it through but do you not agree that the banks were luring them into getting a mortgage? These banks were relying on people with an income of $50,000 to keep up with their payments so that various investors all over the world will profit from the securities they purchased from these very banks. Isn't that a very very very risky venture indeed?
In Canada, where we have a relatively stable financial system, banks refuse to give out an $ 800,000 mortgage to someone who is earning only $ 50,000. Coz they carry out their duty of due diligence. The banks failed to do that in the US and wanted to make quick profits so they packaged these mortgages into securities when they really shouldn't have. I am not saying the people who bought houses beyond their means are innocent bystanders....I am just saying the banks created the fiasco.....They should have never come up with such a disastrous scheme of having securities backed up by people's mortgage payments.