Cure for housing bust caused by subprime buyers: More subprime buyers!

Ever heard of the crash in subprime mortgages? In 2008, this was the primary cause behind the financial and credit crises. The reason: too many loans to people who could not afford them. One government department, in particular, was very much responsible for getting property into the hands of large numbers of people who should not have been buying: U.S. Department of Housing and Urban Development (HUD). HUD’s new solution to “fixing” the housing crisis: make it easier for subprime buyers to keep on buying!

There were various reasons for the high number of loans to unqualified buyers:

Wall Street geniuses came up with some clever methods for splices up these loans and trading them on secondary markets, adding liquidity and making the engineered instruments look better than the subprime debt of which they were comprised. The premise for securitization is great, but the underlying risks posed by this inflated financial system were not recognized by far too many parties to these transactions.

What happened was an implosion of debt instruments related to subprime mortgages. Now, after trillions of dollars of losses, our currency and entire financial system in jeopardy, the children of Congress are tossing more money at HUD to extend more loans that will end up bad. Are these people insane or trying to bankrupt us all?

5 Responses to “Cure for housing bust caused by subprime buyers: More subprime buyers!”

  1. Rob Viglione says:

    @Jan Jozef Jaworski – So what’s the “China Syndrome”? I’m in agreement that what is unfolding right now is not being taken nearly as seriously as it should!

  2. Jan Jozef Jaworski says:

    What we are observing is the economic equivalent of “The China Syndrome”. The meltdown & the consequential bubble burst is so much more substantial than we are willing to admit or accept. Its all a confidence trick – there’s no confidence left & that has devalued all those things that had a price tag.

  3. Rob Viglione says:

    @Brandi Jo Newman – Very well put. Americans, in a way, deserve the unwinding taking place. As a society, we’ve adopted an absurd complacency by delegating our well being to bureaucrats…in the end everyone who has refused to help themselves will suffer the consequences.

    For the sake of the readers here, what are some basic recommendations on how to accrue wealth outside of the stock market?

  4. its like I learned in my political science classes: violence begets violence… stupidity begets stupidity.

    until we, as a nation, take control of our own stupidity we will always be destined for lower and lower expectations. we want to be given the easy way out, we think we are entitled to some sort of social retirement, we believe that the only way to have money is to risk it in the stock market.

    stop relying on these people in government and wall street to give us our freedom. there are plenty of avenues to start building a thorough controlled system of freedom with money, health and spirituality.

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  1. […] now, govenrment’s solution is to encourage subprime loans with HUD, while Fannie Mae “drop[s] some credit-score requirements, reduce[s] income-documentation […]