What did the banks have to gain from giving out mortgages to people who couldn't even pay them back?
Also why do people blame the Fed? From what I've read they did a pretty good job preventing shit going south during the crisis.
Because if a bank gives out a $150'000 mortgage, they expect to earn at least double that in interest payments over the next 20-30 years.
The problem is defaults and applicants weren't properly vetted for this.
>What did the banks have to gain from giving out mortgages to people who couldn't even pay them back?
Nothing, the government forced them to.
Also the extremely low interest rates from the federal reserve was the main reason for the boom.
The government starting handing out cheap risk free money for housing loans to try and stimulate the economy out of the dot.com bubble crash. In the process they inflated a massive housing bubble. Pretty much the same way the Fed is now pumping equity markets full of phony money to inflate a stock bubble to get them out of the housing crash.
Don't tell anyone here though. Apparently you can print money forever, the gains in the markets the last 3 years were "real" and the US economy is thriving.
>high risk = high interest
>it's not even the banks money
>taxpayers are bailing out banks with their own money
you go to a roulette table and receive $1000. Whatever the profits are, they are yours. Your losses are covered by the house. Make your moves.
The people who gave out the mortgages packaged them into mortgage-backed securities, which they would then sell to investment banks who would get the interest. Mortgages have high ROI and usually a low rate of default, mostly because the value of a home tends to increase pretty steadily over time, so these securities became very, very popular and received the highest possible investment ratings. This increased demand from investment banks for more securities, so the mortgage lenders started loosening their credit standards to meet demand. The investment banks never caught onto this and continued to gobble up all the securities they could, particularly because the Fed had kept interest rates stupidly, ridiculously low and the securities were the only things getting any sort of good return.
To be honest, it wasn't even that people without creditworthiness got homes that caused all of this. That just kickstarted a decline in home values once market demand was tapped out. People bought homes expecting they'd be worth 30% or so more in ten years, instead many of them lost half or more of their value within two or three years, and people just decided they'd rather default than pay a loan on something that was worth half as much as it was supposed to be.
You're right about the Fed's low rates playing a big part, but you're absolutely wrong about the CRA, which is an excuse invented by the same people who think forcing the Fed to keep rates low is 'laissez faire' and 'free market'.
they get fees and interest . they don't give a fuck if the loans fail because he government will just print money to bail them out. it's like gambling with no chance of losing your own money, why wouldn't you just place as many bets as possible?
but money is printed and lent out faster than people are born
Clinton was responsible for most of the things that lead to it. Investment in communities that couldn't re-pay loans, repealing glass-steagall and so on. The funny thing here is that the Bush government actually tried to have Fannie Mae and Freddie Mac investigated, which would've prevented most of the crash, but the democrats killed it.
Another huge deal was also Clinton repealing glass-steagall
>It repealed part of the Glass–Steagall Act of 1933, removing barriers in the market among banking companies, securities companies and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company.
They got all the payments, took the collateral too, got handouts from mommy government for the "loss," and resold the asset. Great way to get paid multiple times for the same thing while half the populace is stupidly stuttering "muh job creaturz."
>but money is printed and lent out faster than people are born
except I dont care about "money" I care about USD and you care about whatever currency you have to actually use to pay bills
So the fed can print 3 trillion as long as it only represents available liquidity and stays in banks and if the US dollar is strong and my income doesnt come from export then I can live with that arrangement
You try to black and white this shit and it just aint gonna work
Do you know about pyramid schemes and how they work? people sell you things, and if they are lucrative enough, you fall for it?
Like wise, Banks in Usa Showed the investors etc in france and other countries, that they are getting bigger, more loans on paper, more Money to be recovered, and then when they weren't able to collect after 6-7 years, people or investors started pulling out their investment, then panic, remove, panic, remove, boom.