OT: I'm confused about the financial crisis

Ok you really really really want a bottom line:

Americans LOVE to live beyond their means. They love to have cars they can't afford, they love to have bigger houses then they can afford, if their neighbors buy a 60 inch flat screen TV, they MUST have one too.....and how do they do all of this? Well through credit, lots and lots of credit. So when the real estate market went through the roof, going up 30 percent every year, banks, instead of saying "this is temporary, the market will eventually correct itself and the real estate bubble will pop" said " HEY lets start preditory lending, finding people who want the money and will extend themselves to almost 100 percent of what their house is worth, and every time it goes up well lend them more money based on the percieved value of that home int he market place. It may not work long term, but well make some killer bonuses right now, when it matters".

SOOOOOO thats what companies did. Looking at quarterly bottom lines, they lent to people based on increased market value of their homes. So if you bought your home 5 years ago, and it cost 100K and a year ago because of the crazy market had a value of 200K, banks would lend you that 100 K based on equity value in your home. SO now you owe just as much as your home is worth, THEN all of a sudden the market takes a nose dive, credit starts to become a bit tight, and people stop buying homes as quickly, the market becomes sluggish, and NOW your "200K" home is worth 150K....but you owe 200K, and are now having trouble making payments on it because you borrowed WAY more there you really could afford. (this is not a chicken/egg thing..lots of these things are happening at the same time, it just compounds itself into one big problem).

SO What do you do? You start to fall behind in your payments, you might walk away from the house......short sales (forcing the band to let you sell the house for less then you owe on it) etc etc etc....and you get ONE HUGE problem.

This is really simplistic, but again I go back to saying the main problem is Americans love to live beyond their means...and it causes issues.

Scott

It's the same everywhere. Here in Japan many people will borrow from their relatives

(from the people who don't consume beyond their means that is - I suppose there ARE more in Asia than in America. In America, it's THE THING to do.)

I've heard of a lot of people borrowing between 2000 and 50, 000 or more bucks from their relatives here and then not returning the money.

It's the relatives going unregulated though, not the big money machines that want to control the folks of the US.

****ibanks! (That's how you say Citibank in Japanese!)

Seems pretty simple to me.  The fat-cats of the financial world handed out a bunch of crummy high-risk loans based on "projected future values", so they could pad their own pockets.  It blew up on 'em, and now, us good old "average working Joe's" are gettin' strapped with the bills while the fat-cats enjoy their spoils and riches.

They should give the "bail-out" money to the taxpayers. Every taxpayer would get over $250,000, after taxes. Now just think what would happen if working folks got that much money at one time.  They would pay off existing mortgages, buy new homes, pay off their vehicles, or buy new ones, pay off their other bills, etc. The money would be back in circulation, which would stimulate the economy.  But, that probably is just too simple for the powers that be to figure out.

My $.02!

 THAT IS SOOOOOOO F***IN TRUE!!!!!!!!!!!!!!!!!! (standard 'kid' response here, sorry haha) Anyway, if the government could actually understand the damn issue and not just GIVE the money to all of the businesses who lost it to begin with then this mess could be fixed a lot swifter. You're right about everyone getting money to pay off things, that would make the MOST sense....HOWEVER we live in AMERICA, land of the MORONIC and home of the CORRUPT. So yeah, this will just be a big ole ****ty cycel that we go through every 30 years or so I guess from now on until we get someone who actually cares about the people and not big business.