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Banks lent trillions to people ill-equipped to repay Component1 #6905 Commercial banks and investment banks lent vast sums—trillions of dollars—for housing purchases and consumer loans to borrowers ill-equipped to repay.

CONTEXT(Help)

The Global Financial Crisis »The Global Financial CrisisThe Global Financial Crisis☜Exploring the causes, consequences and responses to the global financial crisis. ☜F1CEB7

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Long-term causes of the financial crisis? »Long-term causes of the financial crisis?Long-term causes of the financial crisis?☜What are the long term causes of the current financial crisis?☜FFB597

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Unintended consequences of earlier public policy choices »Unintended consequences of earlier public policy choicesUnintended consequences of earlier public policy choices☜The roots of the crisis lie in the unintended consequences of policy choices made with respect to the financial sector over the last 30-40 years—which have allowed the volume of (all kinds of) debt in the global financial system to explode.☜59C6EF

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US spending funded by credit »US spending funded by creditUS spending funded by credit☜Increased US consumer spending built on diminishing household savings, mortgage equity withdrawls, and increasing credit.☜9FDEF6

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People encouraged to live beyond their means »People encouraged to live beyond their meansPeople encouraged to live beyond their means☜People encouraged to live beyond their means.☜9FDEF6

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Banks lent trillions to people ill-equipped to repayBanks lent trillions to people ill-equipped to repay☜Commercial banks and investment banks lent vast sums—trillions of dollars—for housing purchases and consumer loans to borrowers ill-equipped to repay.☜9FDEF6

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Link[1]

Author: Jeffrey D. Sachs, Scientific American
Cited by: David Price 10:01 PM 4 October 2008 GMT
URL:

http://www.sciam.com/article.cfm?id=fixing-financial-crisis&print=true

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"The origin of the U.S. financial crisis is that commercial banks and investment banks lent vast sums—trillions of dollars—for housing purchases and consumer loans to borrowers ill-equipped to repay. The easy lending pushed up housing prices around the U.S., which then ratcheted still higher when speculators bought houses on the expectation of yet further price increases. When the easy lending slowed and then stopped during 2006-07, the housing prices peaked and began to fall. The housing boom began to unravel and now threatens an economy-wide bust."

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Entered by:- David Price
NodeID: #6905
Node type: Component
Entry date (GMT): 10/4/2008 9:56:00 PM
Last edit date (GMT): 10/4/2008 9:56:00 PM
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