The stock markets are bleeding red today. Lehman Brothers has gone BK, even though it never had a quarterly loss as a public company until this past June. The financial system is a complete mess.
How did we get into what Alan Greenspan has called a “once-in-a-century” financial crisis? Let me refer you back to an episode of This American Life (“The Giant Pool of Money”) which we featured earlier this year. (Listen here.) Step by step, the show traces in its trademark, entertaining way how this credit debacle took shape. Along the way, you’ll discover how 70 trillion dollars of global money needed to get parked somewhere, and it found the US housing market. As the money poured in, the American investment community cranked out as many mortgages as it could. And when there were no more qualified home buyers left, the banks started lowering lending standards until there were none left. In the end, even dead people were getting mortgages (sadly, a true story). Give the podcast a listen. The whole debacle gets pieced together in a way that you’ve probably never heard before.
so, loan officers of banks approved loans that should have never been made, and some of these loans were for HUGE homes, many in these banks made money. how can they be held responible?