The Giant Pool of Money – The Hands-Down Best Explanation of the Credit Crisis
I’ve read more articles and descriptions of the Sub-Prime Mortgage Mess and current ‘credit crisis’ than I care to admit.
It wasn’t that I was looking for answers myself, per se. And I always felt I had a fairly good handle on what went down from having witnessed it, more or less, from my front row seats.
Really, I kept looking because I was searching for someone, intelligent – neutral and capable of telling the story in its entirety in order to better explain the situation to my clients. Mostly because they were getting a lot of sound bites with very little substantive answers.
There was a Money magazine editor who tried – and he did a pretty good job. A NY Times article came out last year that was also really good, a bit technical, but fair I thought. Almost all the blog postings I came across that attempted it ended up with extreme views on either side, ‘greedy mortgage broker’ this and ‘evil stock broker’ that, fueled by the ‘always deceptive real estate agents’…
…(Cue the angel music)- then along came Ira Glass. My hero!
All joking aside – this week’s free download of This American Life narrated by Ira Glass, entitled ‘The Giant Pool of Money’, single-handedly explains, in layman’s terms, what happened, why it happened, and how it affects everyone – not just those who are homeowners or those who are facing foreclosure. I have to say, there wasn’t any description or story included that I disagreed with, and more to the point I learned several things that I previously did not know.
I highly recommend taking the time to download and listen – you can also subscribe to the podcast for free at the iTunes Store where they post a new podcast every Monday. It is well worth the time regardless of whether you are a past, present, future or never-to-be homeowner.
And ultimately, the current credit crisis has ended up impacting everyone. More so than I even realized before listening to this podcast myself.
Read more about the episode here.
Download the MP3 of the podcast here.
The securitization process which replaced the “hold for investment”
Anonymous at May 20th, 2008 at 4:10 am ( )process within the banking sector is all but dead. Currently GSE’s account for 95% of current mortgage activity. This is the mstt serious short and longterm problem facing the mortgage financing market: where is the money going to come from to fund future mortgage buying? Will the ARM widely used in Europe become the standard here and if so how will the banking sector’s evaluate and price risk for this market. Is it possible to go back to the hold for investment which was the backbone of the thrift industry before the 80′s crash and bailout.
The credit crisis is about risk and how it will be priced in the future and it may be that SFH financing will have to compete for money which will mean significantly higher rates and tougher lending rules.
Thank you for interesting tip. As you said, everybody was influenced by the crisis, not only Americans, but the whole world. I have read that European banks made bigger loss than American. I am Steveston real estate and even in this local market you can feel the tentacles of crisis octopus. And our whole real estate market is slowing down substantially now…
Vancouver realtor at June 12th, 2008 at 7:51 pm ( )Jay
I explain the credit crisis as lax regulation coupled with US gov’t programs to encourage home ownership that allowed the mortgage industry to give too much money to people who couldn’t afford it without disclosing to these people the potential risks.
I am a realtor in Downtown Vancouver and I am asked about this quite a bit even though here in Canada sub-prime mortgages were never as popular and ARMS are illegal.
http://www.mikestewart.ca/
Mike Stewart a Downtown Vancouver Realtor with Century 21 In Town Realty at November 8th, 2008 at 4:26 am ( )