Subprime US Banking Financial Crisis Explained Part 3

http://www.informedtrades.com/
The 3rd and final lesson in a series on the subprime mortgage US Banking financial crisis explained.

Category:

Education

Tags:

• subprime
• financial
• Banking
• crisis
• mortgage
• housepricecrash
• sub-prime
• cdo
• stockmarket

[coriolanus78]

I have a question,why do we have to have an institution setting the interest rate rather than leaving it to the market,it seems to me that manipulating the interest rate by the fed is what got us in trouble to start with.I think it is impossible for anybody or any institution for that matter given the size and perplexity of our ecconomy to predict the best interest rate at any moment

[InformedTrades]

Hey Coriolanus, The thing is the FED actually does not "set" interest rates the way most people think. Basically since they are so big they buy and sell in the open market, causing changes in the money supply, which then causes changes in the interest rates. This is important because at some times we need lower interest rates than other, like right now for example, and the market may not dictate this at the proper times.

There are also about 500 other reasons but I'm out of comment room!

[Guedingen]

Good man, many thanks - any ideas as to what can be learned from this fiasco and what legal checks can be put in place to avoid such a thing happening again?

[InformedTrades]

my pleasure thanks for the comment. If you look on the homepage of my site I have recently posted an article "7 solutions to the financial ciris" which covers this. Best Regards, Dave

[hatstandman]

Thanks Dave, this video really helped with my understanding of the crisis. Would it be possible to do an update on the financial climate a year on, and an explanation of whats going on at the moment?

[InformedTrades]

Hi Hatstandman, Glad you liked it and thank you for the compliment. Yes I think it would be a good time to do this so I will add it to the todo list. Best Regards, Dave

[Ypsi1952]

Thanks for your explanation. The one thing I did not hear is my understanding is the whole sub-prime was caused by congress and Barney Franks and Christopher Dodd. They required the banks to make loans which were outside the norm to allow people, specifically minorities or low income, purchase the American dream even though they could not afford it . Yes or No?

[BaldyV]

@InformedTrades lol The central banking system is the fed. The central banks adjust interest rates. They're set now by QE. Come on dude. Savings have nothing to do with it anymore!

[defgill]

END THE FED!!!

[CanceledOut01]

ECONOMICS PERIOD 7-8 WOOT

[marston5000]

Thank you, David......You explained it very well. You talk about "sub--prime" meaning FICA below 620. Why then are there three credit agencies? Two agencies might have a high score, the third has low score. What acounts for this? We are nothing but a number to these banks.

[FloodPower]

@coriolanus78 Austrian Economics FTW

[Jonchess]

Little mention of CDS(credit default swaps)which were an important factor in destabilising the financial system around the time of the credit crunch and insolvency of Lehman brothers and still are in other areas of securitiesand assets.

[indriani1012]

thank you very much.

[mackmoud7]

thank you very much