Thursday, September 25, 2008

FInancial Crisis 101

This is my explanation of the mortgage/financial crisis that is enveloping our nation. I think this should explain it for all who don't know what is going on out there.

The federal government decided to get into the mortgage business several decades ago. They call it Fannie Mae and Freddie Mac.

Due to political correctness, these mortgage lenders were forced to give loans to a diversified demographic, even though a lot of these peoples could not afford the mortgage payment. They did not make enough money and should have never been given a loan.

As a result of all of this extra money floating around, there was more competition in the housing market. There were more customers out there shopping for houses. When there is buyer competition, it forces market prices to rise. Hence, houses quickly got more and more expensive and people were buying them and really couldn't afford them. Unfortunately, people (LIKE ME!!) bought a house with a mortgage we could afford in a market that was overpriced.

Soon, everything started to crumble as these people began to foreclose. When there are lots of bank-owned houses out there, it causes all house values to plummet. I mean, if you are shopping for a house, why would you look for a deal when you can get a steal?

The foreclosures began to pile up for Freddie Mac and Fannie Mae and so they are now in the tank. The government wants to come in to bail them out, when they are the ones who screwed it up in the first place by pressuring FMFM to give loans to people who had no business getting a loan in the first place.

The cost to you and me....HUGE! Not only did I spend way too much money on my house that I am unlikely to recuperate for many, many years, but my tax money will go to this pathetic government-owned company to try and fix it.

But on a more philosophical note: with government interference in full-force, we, as the freest nation in the world, continue to lose our freedoms. This is the highest cost of all. The bigger government is, the more power we give away as a people. What a tragedy.

2 comments:

Julie & Chris Tandy said...

Amen! I am not looking forward to the HUGE taxes that will be in our future:(

Larsen's in Wyoming said...

It's too bad Mitt Romney didn't get the Republican Nomination, he is the Business man who would get the economy in order. What a mess! I'm nervous to find out what percentage of taxes we'll have when the new President takes office. Thanks for the informative post!

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