So - who's at fault?
Here's one prominent publisher's take on
"the good intentions, the bad managers, and the greed behind the meltdown."
Time Magazine: 25 People to Blame for the Financial Crisis
Worried about your financial investments in these turbulent times? Call me today to discuss what is possible in our new economic climate.
Here's Why the Markets Crashed
I believe that there is money to be made from smart investing during the recovery period - because I don't work with the "buy and hold" philosophy that helped create the losses people have endured during the current crisis.
I believe in targeting stocks that demonstrate potential for growth - for movement and making sound financial decisions on when to buy and when to sell - to maximize profits.
The History of the Current Financial Crisis
The roots of the current economic crisis have their roots going back almost three decades, and was driven largely by occurrences in the US economy related to credit and the subprime mortgage crisis. A detailed article on the Crash of 2008 includes this brief explanation
"Inflows of money from abroad -- along with low interest rates -- enabled more United States consumers and businesses to borrow money. Easy credit -- combined with the faulty assumption that house prices would continue to rise -- led mortgage lenders there to approve loans without due regard to ability to pay, and borrowers to take out larger loans than they could afford. Optimism about prices also led to a boom in which more houses were built than people were willing to buy, so that prices fell and borrowers - with houses worth less than they expected and payments they could not afford - began to default.
As a result, holders of mortgage-backed securities began to incur serious losses, and those securities became so unreliable that they could not be sold. Investment banks were consequently left with large amounts of unsaleable assets, and many failed to meet their financial obligations. Arrangements for inter-bank lending went out of use, and banks through out the world cut back upon lending"
Here's a timeline:
In the 1980's
- Financial deregulation changed the rules to the benefit of Wall Street, not Main Street
- the Savings and Loan crisis - the failure of almost 300 small "savings and loan" mortgage lenders reduced options at a grass-roots level, and grew the large Mortgage companies to be even larger.
- 1987 Mini-crash of the Stock Market
In the 1990's
- banking crisis in Switzerland, the UK, Norway, Sweden, Japan and the US
- failure of 450+ "savings and loan" mortgage lenders
- The Asian banking crisis
- the cost of the rescue of both the Savings and Loan industry and the Long Term Capital Management companies.
2000-2006
- the "dot-com" crash made paper billionaires worthless overnight.
- the US mortgage/housing boom increased lending, and drove up prices - and foreclosures.
2007
- US housing prices fall, increasing defaults and foreclosures, making many Americans "house - poor" - paying for properties that were worth far less than their mortgage value.
- large bank writedowns and losses at Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse, and HSBC
- banks internationally experienced "runs" on their accounts, needed rescue funds, froze their funds due to the US mortgage market, or went bankrupt
2008
- Sales and rescues begin of numerous financial institutions - Countrywide (sold), Northern Rock (nationalised), Bear Stearns (rescued), Fannie Mae & Freddie Mac (rescued - then nationalized), Lehman brothers (bankrupt & written off), AIG (nationalized), Goldman Sachs & Morgan Stanley (protected by Federal Reserve Bank), and too many more to be listed here.
- Investors take massive losses as each of these institutions falls.
- Housing prices are listed at 20% below their 2006 peak.
- Coordinated Interest rate adjustment by central banks in the USA, Europe, China, Britain, Canada, Sweden, and Switzerland.
- EU, US, German governments adopt various rescue plan strategies to stop the hemorrhage of losses.
- US Government plan to purchase toxic assets abandoned.
