Forum Post: Banks Spawned the Current Economic Crisis.

The banks in this country infected the world by loaning mortgage money without sufficient collateral. Bundled the mortgages in 1,000,000.00 packages and traded the bundles all over the world. In so doing they spawned a financial crisis with their adjustable mortgage rates and payments they knew or should have known that the schuduled payments were beyond the capacity of the borrower to pay at the time they made the loan. In response the banks quickly responded by raising everyones consumer interest rate to bail themselves out of their financial problems at a time when people were struggling to meet the current demands. Bankruptcies and defaults ensued and the government allowed the banks to continue without taking evasive action to control interest rates a policy that further contributed to the decline of the economy because the amount of discreationary spending to stimulate the economy simultaneously and exponentially declined as the banks consumed the money.

The government came along and said the banks are to big to fail and loaned money from the discount window for 0 interest. The banks then earned interest from investment of the money and used the interest to pay back the money borrowed.

The banks had people that were paying the mortgage and would have continue to pay the mortgage if the banks would have negotiate to reduce the payments and principle. Instead, the banks refuse and foreclose on the property and sell it for less than the principle reduction required to keep another home out of inventory. We advised a number of our clients to walk away from their house because the banks refused to negotiate, they were never going to realize equity or a return on investment, the mortgage payment was more than rent. In essense, the banks continue to exasterbate the problems and there are many more foreclosures to come so these policies are continuing to afffect everyone who owns property as the banks continue to add inventory, a simple supply and demand issue.

The banks created the problems and everyone must pay and continue to pay because they got themselves in trouble and they refuse to do anything to stabalize the problem.

Their policies are feeding on themselves when they think the answer is to take more the consequence is in fact less and so they come up with another answer to take more. Increased bank fees and this appears to be playing out as another policy that will result in less rather than more.

Finally, the board of directors are directly responsible because they had a fudiciary responsiblity to protect the shareholders with collaterized loans and they failed.