REASONS FOR THE CRASH !!

How Did We Get Here?
Posted By:Lee Brodie
Topics:Stock Market Stock Picks
Companies:TD Ameritrade Holding Corporation Freddie Mac American International Group Inc Fannie Mae

From homeowners facing foreclosure on Main Street to bankers on Wall Street who find themselves suddenly jobless, how did we get here?
You can point the finger in many directions, but it’s probably best to start with the banks. Blinded by big returns in a booming real estate market, many handed out home loans to virtually anyone: "no income, no assets, no problem."
Those loans were packaged or bundled up by Fannie
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and Freddie
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and peddled on Wall Street by the likes of Bear Stearns, Lehman and Merrill then insured by AIG
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At the time they looked extremely profitable… if homeowners couldn’t make their payments, not to worry. They’d just refinance because down the road surely their homes would be worth more.
But the bubble burst. Housing prices plummeted and homeowners began to default. Now, holding their mortgages was anything but profitable, in fact it was toxic.
But what did we expect from a system built on unprecedented amounts of risk, leverage, and yes – greed. The fate of Main Street and Wall Street became intertwined like never before. And now this house of cards has come tumbling down.
What now?
I’m not sure that this is a fundamental change, muses Karen Finerman. I think it’s unclear where we are. For home investors, I think it’s okay to do nothing.
I can’t understand why the government has to be a buyer of last resort of CDO’s (collateralized debt obligation). There’s a market for them, adds Carl Icahn. What the government should do is loan them money and tell them to go sell it.There are now policies in place that provide a different kind of backstop, but that doesn’t remove the risk all together. However I’ve gotten net longer just out of fear of the short covering, adds Time Seymour.