You hear it every time a new scandal erupts. People think that Wall Street is becoming more evil, corrupt, etc. Well if you've read Benjamin Graham's Intelligent Investor, you know financial scandals are nothing new.
If you've had a hard time following the financial drama known as The Subprime Mortgage Crisis (you know it's really bad when it has its own scary title), you're not alone. A friend sent me the following link to a simple slideshow about the subprime crisis. The presentation has some crude language and some crudely drawn stick figures but it clearly explains the crisis that seems to defy explanation.
Some pretty big names in the financial industry were taken in by the scam. What does that say about the condition of our government regulation and industry self regulation?
In this case, institutional investors felt the pain but it effects you too. Your tax money will bail out financial institutions and real estate speculators. Your investments will take a hit as a "receding tide lowers all boats."
If the professionals can't identify bad or fraudulent ideas, what hope do we have? I'm not sure but hopefully you can laugh and at the same time learn something from this slideshow:
Subprime Mortgage Explanation on Google Docs
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One thing everyone is overlooking when it comes to the subprime mortgage crisis is that president Bush in 2002 & 2004 addresses Freddie Mac and Fannie Mae during press releases and mandated they loosen the requirements for borrowers seeking to obtain mortgage loans. Bush specifically mentioned lowering or eliminating down payments and easing credit requirements. The result has been one of the biggest, if not the biggest mortgage crisis this country has every seen. Bush opened the door for loose mortgage rules that enabled millions of borrowers to obtain loans on even poor credit and no down payments. But the blame where is should go, on the shoulders of President Bush. This is what everyone should be writing about.