Throwing the bums out perhaps wasn't a good idea after all

A political flawed mentality perhaps? While the federal reserve went after and attempted to kill a non existent inflation it ended up instead killing the American economy by keeping interest rates on homes high.

While that fiasco played out and we Americans wishing to change horse in midstream elected the new congress and spent critical months congratulating them and ourselves for overthrowing the old republican guard. Americans rejoiced and no one noticed that the ship had hit an iceberg.

Many people like to blame the war on Iraq but the fact is the war in Vietnam was much more costly and it did not create total economic meltdown as we are seeing now.

Many people like to blame unqualified borrowers but the fact is foreclosures are hitting the middle class and the upper middle class equally.

The remedy to avoid all this was simple, all the Federal Reserve needed to do was lower the interest rates and give homeowners time to refinance and lock in a lower rate. But the Federal Reserve was not that smart---and apparently neither was our "new" congress, nor the White house.

I don't like to argue cause it's boring and I rather do my usual wisecracks, but lowering interest rates to zero won't help much to prevent forclosures.

Mortgage rates are still high now even after rate cuts because banks are trying to save their own skin and not willing to take lend due to trillions in OTC Derivatives.

People no longer have any assests. Banks aren't going to refinance a home that's true value is half current market. They'd rather foreclose now and put home on market before value falls further.

Subprime crisis is a smoke screen for the true cause of the upcoming Depression: OTC Derivatives. Until they are marked to market and hundreds of banks, brokers, insurers, homeowners, and middle class citizens go under the crisis will continue. Probably 3-5 years of pain.

reply to post by ColdWater


The economy was solid a year ago. Foreclosures happen every year but they picked up speed when loans reset higher after the Federal Reserve continued to raise rates and relentlessly went after the "non" existent inflation bogyman.

Because of the flood of foreclosure due to higher interest rates, which caused mortgage loans to double or triple, millions of homes were suddenly thrown into the market because the homeowners were no longer able to make those higher payments.

All those homes on the market from people who could not afford them anymore made the supply and demand kick in. when there is lots of supply there is little demand, so prices fell and property values plunged.

Now people have homes that are worth way less than they owe on them, and even though they can afford to stay in the homes they see no point in doing so and let the banks have them.

The banks are not making money they are losing money left and right and are going under. Hundreds of small and large banks are going bankrupt because of the plunge in property values.