Monday, December 10, 2007

When Mortgages Buy the Farm

When Mortgages Buy the Farm

Following the money. Why are US mortgages crashing? How did we get here? What's a CDO? Why are financial articles written in Klingon? The whole mess is explained in down-to-earth language.

Posted by fofp @ 05:13 AM (546 views)
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2 thoughts on “When Mortgages Buy the Farm

  • Sacred Contracts says:

    Thanks for posting this. I think I understand a bit better now.

    I’ve been lurking here for a while attmepting to understand what is going on – after all I thought house prices couldn’t carry on going up years ago, in fact for most of this millennium!

    Clearly I hadn’t understood the strange mixture of greed and desperation that was driving people but also I really, really hadn’t understood how banks were conning people who couldn’t afford to buy a house into thinking they could. And how the banks were then conning people to buy such unsafe debts from them. Whilst of course making massive profits…

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  • An excellent article. I thought I understood everything but this article filled in a few gaps in my knowledge. Of particular note:

    “The US Central Bank cut the American interest rate by 0.5% in September and another 0.25% in October. The bondholders, however, concluded that this might lead to higher US inflation and promptly raised the mortgage rate to compensate themselves for that risk too. In the days of Jimmy Stewart [?], the Central Bank controlled mortgage rates. Now it’s international investors who call the shots.”

    The central banks are powerless to stop the credit crunch!

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