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Forum Post: How did Glass-Steagall cause the 2007-8 Housing crash?

Posted 7 years ago on Dec. 12, 2011, 10 a.m. EST by theaveng (602)
This content is user submitted and not an official statement

Even if G-S still existed, I don't see how that would have stopped banks from issuing mortgages to people too poor to pay them back. We would still have a housing bubble built on subprime loans, and the subsequent crash n 2007-8 when those loans were defaulted upon

Why Glass-Steagall Didn't Matter

VIDEO 1 - http://youtu.be/w0ycz2gGkTs

VIDEO 2 - Former Clinton administration's Comptroller of the Currency Eugene Ludwig Says Repeal of Glass-Steagall Didn't Cause Crisis - http://www.clipsyndicate.com/video/play/1218118/ludwig_says_repeal_of_glass_steagall_didn_t_cause_crisis_video

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2 Comments


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[-] 1 points by ModestCapitalist (2342) 7 years ago

We would have had a crash with or without subprime. Foreclosures weren't just up on subprime loans. They were up across the lower 3/4 or so of the board. Along with record high consumer debt.

Subprime did artificially inflate the market. No doubt about that. But the middle class have been losing free and clear assets gradually for 30 years. They have been relying more and more on credit in order to compensate for a rising cost of living. Sure, we have been foolish as a society. Buying too much overpriced crap. But the key expenses have skyrocketed.

Energy, healthcare, finance, food, housing, and higher education. All way up. Much higher than core inflation. The record high profits went almost entirely to the richest one percent. They still are. Its very much like a game of Monopoly.

We were in big trouble with or without subprime.

[-] 0 points by theaveng (602) 7 years ago

Subprime did artificially inflate the market.

Hence a crash when the bubble burst. Just like when the dot-com bubble burst in 1999-2000.

And you're right about the credit.

The average debt is now $110,000 per home (plus another $180,000/home of governmment debt).