Essay about Possible Remedies for the Foreclosure Problem in America

2079 Words 9 Pages
The collapse of the American, and subsequent recession, of the world economy has been mired in painful complexity of miscalculations, misunderstandings, and a general overestimation of the prosperity being handed out to insolvent interests at large. Bailouts to credit crunches and Wall Street to Main Street has left banks all over the United States trying to liquidate their assets in order to retain a profitable balance sheet. This, in a macro-level picture, is what has led to the foreclosure of 1,395,044 homes between the beginnings of the economic meltdown in July 2007 and March 2009, (CNNMoney.com) leaving the imagination to fill in the numbers of homes lost up until now. The 780 billion dollar taxpayer tunicate shattered all visions of …show more content…
At the top of the pyramid of troubles are, of course, the Wall Street giants, including banks, hedge funds, credit card companies, and major lenders. These people and their investing vehicles funded the logic and practice of bundling home and consumer debt into tradable assets that would help raise profits due to the sheer volume of debt existing to be traded. This volume of tradable debt became highlighted by the practice in the early 90’s of packaging credit card debt into the mortgages of peoples’ homes that could barely make consumer payments, bringing about the sub-prime mortgage and sub-prime lending market. Volatile profit-driven lending added to volatile profit-driven trading of that lending places downward pressure on consumers and decays the strength of the banking system. All of this financial world jargon can become extremely cumbersome to remember and recall so paying attention is essential in even partially understanding a cure to the systemic illness of the markets. The first, and ultimately most important term of the whole diagnosis is the credit default swap, which is an insurance policy bet whether a debt/loan asset being held, at the current time, will default and moreover, fail. These swaps have no regulations on them whatsoever, making the potential for abuse by interests for their own gain the rule in the OTC derivatives market. Asset

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