The Heart of the United States Economic Decline
Will the economy ever rebound?
It wasn't until last evening that I truly understood how the United States economy declined ever so quickly. At the heart of the decline was Wall Street and the fall of Fannie Mac and Freddie Mac. These two giants used to run the mortgage business with strict rules and qualifications for mortgages. When the World Trade Centers were bombed, the world took a different path that left these regulations behind.
In the aftermath, the government wanted to ensure the economy stayed afloat. The interest rate dropped and the mortgage companies wanted more people to choose their mortgages. The rules surrounding the approval for mortgages were laxed and lies were told on the mortgage applications to get them approved. These lies are the source of the economic downfall.
Laying blame is hard when an entire country falls - but Wall Street needed mortgages to support the growing need for investment packages. With the lax in mortgage rates came an increase in home net worth and homeowners were refinancing their homes at a record pace. This refinance is where the equity in the home was pulled out and billions of dollars were available to spend and invest. The United States was on top of the world - then the ARM rates adjusted and the mortgages were no longer affordable for many.
When the homes started becoming too expensive - many people backed out and sold the home in the hot market. These were the lucky homeowners. Others sat in the mortgage until the home was foreclosed on and the fall began.
The real estate boom made many people rich and took the poor from rentals into home ownership. Today, more people are in foreclosure than ever before and there is no end in sight to the mortgage crisis and the economic slump with 10,000,000 out of work people and no jobs being created. Can the President of the United States fix an entire country and the surrounding world?
