Financial Crisis 2008

This video is an effort to understand the current financial situation in which we find ourselves and how it effects Americans and others around the world. This is my current understanding of the situation and it would be helpful if you would offer your opinions and knowledge on the topic.

Category:

Education

Tags:

• financial
• crisis
• 2008
• burning
• down
• the
• house
• bailout
• what
• caused

[poolguy18]

Interesting video...what about the idea of hedging and derivatives and the role they played in this? What about AIG and insuring mortgages?

[bbarrettalan]

My understanding, and correct me if I'm wrong, is that excessive hedging was one of the conditions that the GSEs got away with due to the lack of market discipline. Which in turn magnified the effects of defaulted mortgages. And as for AIG they are a corporation, but not a GSE, that was taking part in the insuring of mortgages and selling of securities much like Fannie and Freddie. So, I guess it was rather ignorant of me to not have mention their involvement. Is this what you were getting at?

[GratefulToBeDead89]

we do not have a free market, but we need one. its the only system that effectively creates wealth and is morally just. government and economy need to be seperated just like governmnet and state. i do not know a whole lot about the cra, but i do not support government interference or prevention within the economy in any respect.

[bbarrettalan]

Of course a free market would be the most just of exchange among the people of the world. Justice however, doesn't come with a sugar coating like the CRA (making people think they can afford things that they can't). So you can see why many people like the idea of government involvement in economics. The effects of the CRA however, support your idea of government interference being bad for economic systems.

[bbarrettalan]

A real solution would have been to stop sub-prime mortgages before they began, and the only way to do that would have been to not pass the CRA in 1977.

[bbarrettalan]

These investors were right because the government did bail them out. To do so the government just prints new money to buy up the bad loans decreasing the actual value of the dollar. But without the Bailout, mortgages would no longer be a liquid investment making it harder for money to change hands with the economy which in turn would freeze all kinds of production (aka recession).

[bbarrettalan]

While I do agree that a bailout wasnt the right thing to do, we need to remember that we dont The Us doesnt have a free market. Both Freddie and Fannie are government sponsored enterprises (GSEs). This fact is what lead to the belief that their securities were guaranteed money makers, because the US government would not allow their own creation to fail.

[GratefulToBeDead89]

should invest in a safer coporation. this opens the door for competition, competition, competition, the backbone of a free market economy.

[GratefulToBeDead89]

i look at this as someone walking into a casion and dropping $1,000 on a round of roulette. if they win they keep the earnings, but if they lose, the casino reimburses then loss. this doent make much sense. when you play big you need to be ready to lose big too. people who had money in freddie and fannie also need to understand the way in which the coporations who have their money run themselves. if they dont want a risky company with a high probability of losing, then they

[GratefulToBeDead89]

i agree that the bailout was not a good idea. in reality, no action should have been taken. in reality, fannie and freddie took a risk. the greater the risk the greater the reward. they stood to gain big, but ended up losing big. such is the free market.