Posted 10 years ago on Dec. 28, 2011, 7:23 p.m. EST by infonomics
This content is user submitted and not an official statement
I just completed viewing the documentary Inside Job which has left me with one remaining question. What was the initial cause, the first cause, that render homeowners unable to adequately meet their mortgage payments? I'm offering the following suggestions only to constrain your responses to the most reducible reasons. Sometimes people tend to think at superficial levels that really have more prominent underlying reasons. I am not offering reasons to assert my understanding or to imply any kind of intellectual prowess. My best speculations are:
- Adjustable mortgage interest rates were accelerated according to mortgage contracts because properties lost their value due to oversupply.
- People loss their jobs to outsourcing.
- People loss their jobs due to natural cyclical recession.
Of course I realize that simultaneous reasons can exist.
Incidentally, the answer to this question must not be so apparent if you recall the interview that Candy Crowley had with George W. Bush during the time in which he was pitching his book. In that interview Crowley asked Bush why his administration, with an abundance of intellectual resources, did not see the crisis sooner than they did. Bush hesitated but eventually replied that he did not know.
My interest in this matter is more philosophical than political.
Again, forgive the pressing but I am not satisfied yet.
A married couple is sitting across the desk from a mortgage broker, who, at a minimum, has flippant regard (reckless indifference) to their ability to make the loan payment. Both the husband and wife are securely employed and, at a minimum, understand simple math, such as their combined income is sufficient to meet the mortgage payment at the current interest rate. They may even understand the causes, probability and consequences of rising interest rates. (As I type I am beginning to convince myself of the first cause.) Did the couple ignore the probability that their future income would not keep up with the probability of rising interest rates and hence mortgage payments? So, what I am suggesting is that the problem was not so much one of lost income from unemployment but rather one of static income not keeping up with increased mortgage payments. Here, I am giving the couple the benefit of the doubt on the matter of their integrity, which to say, I am not indicting them with the suggestion that they sat across from the mortgage banker with foreknowledge that their jobs were not secure.
From here I am well aware of the domino effect.
Thank you sages, From a Reductionist
Update for the Archives
After reviewing George W. Bush's Address to the Nation on the Economic Crisis on September 24, 2008, I am closer to the understanding that I sought.
The metaphorical domino that began the unraveling occurred with aggressive home construction that fed upon the false optimism initiated from low interest rates, which, in turn, engendered from capital fleeing low interest cash-bearing investments, such as CD's, and from a spiking stock market. In other words, home speculation was the only sensible play. When home inventories exceed demand, home prices stagnated, then began a decline and with the decline came the triggering of adjustable rates. So, in summation, the house of dominoes was created by deregulation and opportunistic financial mavens and it collapsed from the false optimism of home builders. Homeowners further aided the collapse because they were not financially able to endure the probability that they ignored at closing. You can encapsulate this entire understanding by citing that the economic collapse of 2008 was a system failure.