Oct 032008
Well, the US Gub’ment just donated $700,000,000,000 USD (700 billion!) to the banks and private corporations to bail them out. If you wondered how we got into this fix, have a look at the comic above. It explains, in layman’s terms, and with stick figures, just what went on.
Here is a serious article giving the details.
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7 Responses to “Sad, but true: Subprime lending 101”
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So how are you worse off not having lots of the houses on your street sold in foreclosure driving down you house price?
Nick
Ugh…the bail out…not so sure about it. It seems like it’s giving a free pass, not too mention giving a very large chunk of the economy to the control of government which I don’t know if that is such a good idea. They aren’t the most efficient lot are they?
It seems like logic went out the window not only on the part of the lenders but the borrowers as well.
Fortunately it hasn’t seemed to affect my area so much, at least I have not seen or heard about any foreclosures here. I am still getting scads of credit offers in the mail…5 this week and probably more in the mail today. Now my kids aren’t getting them so much as they used to. But, one is an unemployed 18 year old college student so he shouldn’t be getting them to begin with and it always makes me scratch my head when an offer comes in with his name on it. My oldest is building good credit through responsible management of his finances and on a Military salary that’s pretty impressive, but he’s always been very good that way. Like us he was raised to not spend what you cannot afford so he is building his credit and financial well being through responsible handling of his finances. We never bought more than what we knew we could afford. We also accounted for the unexpected and are pretty frugal really. It seems like personal responsibility has flown out the window and the desire to get stuff has taken over all reason.
Oh I should mention that my middle son in college for the past month still has the same $40 cash in his pocket that he left with. The only thing he has used his cash card for is books…he’s such a good kid! We were going to give him $50/week allowance for spending $$ but it hasn’t been necessary.
Laurie, you said “giving a very large chunk of the economy to the control of government which I don’t know if that is such a good idea. They aren’t the most efficient lot are they?”
But at least some of those governmental guys are not so much driven by short-term greed and the overused “shareholder value”. That here in Sweden (and in Europe in general) the government has a slightly higher influence on fundamental economic decisions makes me sleep a bit better at night.
On the other hand, I’m not that familiar with the US economy. But the comic that Paul linked to confirms my prejudices somewhat…
It’s a pity that a lot of innocent people now have share the consequences of largely naive customers, greedy shareholders and a highly incompetent Bush-administration.
Best wishes for a speedy recovery!
Thomas
@Laurie: I’m glad to hear that your kids have a good idea of how to handle their cash. So few kids do. My younger son is really good with managing his money and he says that there is no way that he’s ever going to own a credit card. He doesn’t want one. He’s a cash-only kind of guy!
@Thomas: I don’t think that the customers were so naive. There’s that personal responsibility bit of knowing what you can and cannot afford, regardless of what someone will let you spend. I would agree with the greed bit, for sure. Lastly, it is private business and the president, nor his cronies really had anything to do with it. It’s just a case of ‘easy money’, unfortunately.
@Thomas I would argue that instead of it being in the hands guys driven by short term greed it will now be driven by power hungry guys motivated by long term power trips and greed.
And guess what? Unemployed, college student, middle son got a credit card offer in the mail yesterday in the mail shortly after I posted this… :-/
And we got 3 more credit offers in the mail. GRRRRR!
@Laurie: Yes and no. Now and then you might have a chance of influencing those “power hungry” people somewhat – by voting or even starting to actively participate in local policy. And you can actually demand to get (most of) the information that is in the system. Much more than what one could expect from any private corporation.
I know, it’s certainly far from being perfect – but still…
@Paul: Yeah, you might have a point. Unfortunately…