Two Years Since the First Sign of Financial Meltdown

It all started “when news broke that two Bear Stearns hedge funds speculating in mortgage-backed securities were melting down” says Allan Sloan, a senior editor at large at Fortune dot com. He mentions in the articles that the meltdown came into existence because of “subprime” mortgages. Subprime mortgages allowed anyone with a poor credit history to get a loan. I remember in my Advanced Financial Management class we were talking about how banks were giving loans to people who did not even have adequate evidence of even having a job!!! The irony is that these are self-inflicted wounds and some of the major banks responsible for subprime mortgages such as Wells Fargo and Citibank collected billions of dollars through the Troubled Asset Relief Program.

Sloan also mentions that there are other reasons too behind the financial meltdown such as credit cards, constructive loans and leveraged buyouts. It seems like even if the housing market improves, that might not just alone bring the economy back up.

Link to the article:

The Financial Meltdown’s Unhappy Anniversary

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