If you have no been living in a cave for the past two weeks you have probably heard about how the
fundamentals of the economy are not so strong, no matter how many times John McCain told us otherwise last week. The situation, minus double talk, is that greedy companies were given the authority by the Clinton and Bush administrations to lend to anyone with a pulse to encourage a society of homeowners. Naturally this drove demand for housing far above the market level, so prices rose at astronomic rates, which made investment in mortgages seem like a sure bet(which does not exist in this world).
Homeowners, meanwhile, borrowed against their homes on the belief that the value of the homes would continue rising like Michael Jackson at a pre school, so at the end of the day you could have a person with a mortgage for a home with a line of credit on the home based on a higher value than the house is worth, resulting on owing much more than the house is going to be worth for a long time.
Finally, the government has been largely responsible for the problem by keeping interest rates low, which allowed easy lending and less scrutiny for the creditworthiness of borrowers. One question nobody asks is, why is the former CEO of Goldman Sachs asking for nearly a trillion dollars to bail out his company?
