Coming up with the idea to do an NBR series on the 2008 financial crisis was pretty obvious. After all, that’s what we in the NY bureau and in our offices across the country have been living and breathing every day for the last 2 months. The challenge was how to organize our coverage.
At first, a chronology of events leading up to and throughout the crisis seemed the most logical….but, maybe not the most interesting or informative. After several days of mulling it over, it finally became clear. The best way to structure it was to divide it into components of “blame.”
Washington, Wall Street and the American public all played a significant role in the current mess. Who or what’s role is greatest will be debated for years to come.
I hope you like the series. I certainly enjoyed my part in it.
Oh, and if you miss it on TV, check it out online: Anatomy of a Financial Crisis.
Comments
There is a lot of stuff going on out there and I believe the people should see what is really happening. As everyone thinks, it is something that it is not.
This is really upsetting.
Lets see if I can break this down in the most simplest form possible.
• Banks/lenders create exotic lending products and offer is to the public and business areas
• They profit largely from this as well…. (So where’s the money?)
• They turn around and blame the subprime market for this.. how interesting!
o They paid brokers MORE money to put people into these subprime or exotic loans that could have received fixed rate or no home at all!
o They avoided using any common sense with the loan papers for staying within the basic terms of a loan
• They turn around and sell off notes and securities to investors all over the globe to make even MORE money.
• They buy CDS’s to protect themselves, did they know this would happen???
• They again blame the subprime market or low income people
• They do not wish to help the homeowners rework terms with a permanent fixed rate
• They only want to do temporary modifications to loans (Hope Now = No Hope!)
• They borrow BILLIONS from the Federal Reserve. (People still do not know about this part)
• They buy up so called weaker banks or business… I thought they lost money or didn’t have any!
• They get great lower rates from our government yet raise rates on lending
• They stop lending all together, even for good credit people and business.
o No cars are sold, merchandise purchased or foreclosures sold
o Now business can’t even complete projects or continue to fund manufacturing. We all knows what that leads too!
• Banks have money (liquidity) but refuse to lend. They did not need more!... Thanks Paulson…
• They are getting paid on both ends, only AIG is getting caught in the cookie jar for now… there will be more.
• What reason would they need to lend when the people/government are depositing large sums of money right into their accounts;. No incentive!
People/Investors:
• They purchased more home than they can afford
o Remember most do not fully understand lending and was steered into higher priced homes due to brokers saying you can afford this.
o People & investors directed brokers and lied on applications to purchase more than one home or larger home on hopes of flipping for BIG profits
• Investors walking away from their homes (aka investments)
o True homeowners do not walk way, until it’s tool late in the process
o As the investment has lost money (aka vacant homes)
o Same investors are now buying the REO’s & short sales
• Now homeowners (good credit) are walking away due to reduced value.
o They can buy a home (same or better) for a much lower price and save money in the end (lower mortgage payment).
o They then turn around and let their home fall into foreclosure.
Government:
• They started a ton of bailouts !!!!!!
• Every analyst and business person said in plain and simple terms “FIX HOUSING”
o Since that wasn’t addressed in the beginning now it is “UNEMPLOYMENT”
o Should we wait for something else!....
• Government directs its efforts in every other direction but housing (I guess government means: go around problem)
• They provide low rates, great terms, free money and open policy to banks/lenders
• Spend Trillions of dollars avoiding the issue and allowing banks to recover loss money
• Market is bad due to government getting involved in private business
• Investors have pulled out of market because of government… the selling
o Making people loss TRILLIONS in retirement funds and this includes state money that invested in these “Too Big” to fail companies.
• Government has to bailout out everyone now with our money and borrowed funds,
o no turning back now… because the lawyers are waiting to file suit if they do!
• Government never helped ”The People” that is the main reason why they are out of office…CHANGE!
I believe you should look into these issues and more. As the simplest answer is right in front of everyone (Paulson open your ears) and they do not see it,
The banks/lenders are the center of this whole thing! yet we give them money to pay VP’s and bonus’s or fatten their balance sheets. Send me some money and I will not lay anyone off or take a bonus. Not like them who have put many of their own people on the job fair line.
Are we not seeing what really started this and what is continuing to this issue…..BANKS/LENDERS.
I’m now seeing my customers who purchase from me can’t any longer due to banks lowing or removing their terms. If this continues then I will need to lay people off. This is just one bad circle! I’m also getting renters who are now unemployed and can no longer pay rent. I also have homeowners turn renters who are losing (possible) their job as well. All of this will put tons of people on unemployment (State/Government) payment plans (aka checks)… are you seeing a pattern here!.... HELLO!
As for me I’m seeing friends and family close doors, move, lay off people and cut back. Just to keep food on the table and a roof over their head.
If you’re not lending you’re not making money. That is what makes the world go round. It isn’t the loan products that did it. They work fine as long as there are checks and balances involved. It is simple common sense: if you make 20k a year you can’t buy a 250k home, much less one for even more. Just because values are increasing. COMMON SENSE You couldn’t even get a car loan for a 30k car on that salary, so why a home (out of your salary range).
Keep it simple: help the housing and employment and you will correct the nation.
I hope I have put forward some valid points for you… again, this is what I am seeing on the east coast and hearing from friends around our nation.
I've been watching your program since the early 80's and I especially enjoyed your recent documentary on the financial crisis.
I just want to add that, in his own way, Stan Weinstein predicted the financial crisis when he appeared on your program on 9/14/07 and here's how.
On 1/18/08, 22 weeks after the 8/14/07 subprime problem came out in the news and 18 weeks after Stan Weinstein's appearance on NBR (see extract below), the DJIA broke down below "his" warning level of 12800. Besides, the only breakout above the 30 week moving average* after that date, which happened on 4/4/08, was in fact a fake buy signal since the volume on that day was below average:
"Market Monitor"-Stan Weinstein, Editor & Publisher of "Global Trend Alert"
Friday, September 14, 2007
...
WEINSTEIN: Here we go -- my new level is 12,800. If at any point the Dow breaks down and closes - at the close below 12,800, that would turn what's a problem market into a much bigger problem.
...
____________
* In his book, Stan Weinstein explains that the following criteria must be met for a buy signal to be perfect: the quote must break out above a resistance (top portion of a sideway movement) and above the 30 week moving average, with an above average volume.
Dear Suzanne,
I've been a viewer of NBR for over 25 years now and thus am a solid fan of this wonderfull show. With respect to the recent series on the "Anatomy of a Financial Crisis", this too is the best summary of the crisis I've seen to date.
I do have a Major concern though in the 3rd part of this series: "Who sparked the financial meltdown? Well, the American public can't claim innocence." I agrre that the public needs to claim some part of the meltdown. My concern is that NBR did NOT mention or say anything about the Predatory credit card practices of Banks and other financial institutions. These Predatory practices which include a whole host of underhanded sales practices, fees and service charges, interest rates all of which are designed to put the public into debt AND once they are in debt to actually persuade the public that it is in their best inteset to get in MORE debt.
Maybe you can do a series on how these banks actually take advantage of the public with regards to debt and reveal how their predatory practices helped to take what could have been a standard level of public debt to the unbelievable level the public was pushed to accept.
Sincerely,
Phil Quarles
Cedar Park, Texas
I hear a lot of economists continue referring to the consumer spending component of the US economy as if it should be near 70%. What would it be if we factor out spending of future earnings on credit? How much lower would it be if the savings rate went up to 10%?
NBR should be compulsory viewing for a whole lot of people! Great show! Congratulations to you all at NBR!
I just wonder if the consumers should be blamed at all ..... if the consumers did not borrow to spend, the financial crisis might have occurred sooner. The consumers need to spend to keep the wheels of the economy moving.
After all the bail outs, the consumers will be encouraged to spend more to get out of the crisis. Spending by the consumers will be encouraged through fiscal policies .. tax cuts, rebates & other handouts.
Best wishes,
Tahir Omeri
Regarding the 10/30/08 "Anatomy of A Financial Crisis," GET REAL! The proposition “American consumers bear responsibility for the current financial and credit crisis” could be viewed using one corporation as an example…Capital One Financial. Founding partner Richard Fairbank received awards from Stanford Business School in April 2006 and later that year from American Banker. American Banker’s commendation endorsed Fairbank for his “central role in a visionary organization whose innovations have transformed lending practices in the credit card industry and made credit more accessible to more people. Early in his career Fairbank developed the idea that would ultimately become Capital One’s hallmark—using information to integrate traditionally separate functions of marketing, credit, risk operations and technology—to offer financial services tailored to fit each customer’s individual needs.” The Dean of the Stanford Business School honored Fairbanks, an MBA Stanford alum, "innovations have transformed lending practices in the credit card industry and made credit more accessible to more people.” Credit expansion as a “cultural imperative”…NOT! Credit expanded beyond any reasonable expectation by design and with the explicit approval and applause of the financial establishment…YOU BETCHA!
Tim McDonough, San Jose, California & Secesh Meadows, Idaho
Hey Suzanne,
Nice Photo! Makes you look Portuguese. Looks good. Now alls you got to do is save movie rights to *Financial Crisis, the Movie*.
I read housing bubble warning in Barron's in 1995. Later I tried to find article for reread. Just couldn't find it.
Adjö Suzanne
H