There was more than one issue contributing to the economic downfall of “The Great Recession” and these issues had an effect on one another.Yes, people were given mortgages they could not afford, but defaults on mortgages weren’t the only story.
The way in which risky mortgages were packaged as complex risky investment “products” was the reason there was a devastation of the entire financial industry which lead to businesses being unable to borrow from financial institutions which were in trouble because of stupid high risk lending and even stupider high risk investment strategies that often bordered on being financial scams.
Also, homes were being fraudulently appraised at higher and higher values for too many months in a row. If a realtor or mortgage lender would not appraise high enough they would be replaced with one that would. Clinton, Bush, Wall Street, Greenspan all saw “real estate” as the investment solution to replace the wealth taken out of the financial sector by “the Dot Com implosion”.
And while the financial sector’s decimation by bad practices in mortgage, other lending (like already over extended “home owners” borrowing against the often over inflated “value” of their homes), and risky complicated portfolio “products” were the primary causes of the recession, it did not help that oil prices were so high in 2007 that some of us were paying as much as $5 per gallon for gasoline and worldwide wheat prices went up 200% in 2007/2008 due to widespread “stem rust” blight on wheat crops across Asia, Africa, and The Middle East combined the aforementioned oil prices which also had huge costs in everything from trucking and shipping to agriculture, construction, alternative energy development, military expenditures, airlines, and let’s not forget household income.
It was hard to pay that mortgage you couldn’t afford in the first place (whose value had increased and with it your variable interest rate) when you couldn’t afford to fill up the gas tank of your SUV you were still paying for (the down payment of which was borrowed against the value of your home) , while your grocery bill was going up and your hours were being cut because the small business you worked for couldn’t really afford to pay its employees and it’s suppliers on time due to its bank being unable and/or unwilling to continue to extend credit the way it had in the past because it had lost enormous amounts of money thanks to the repeal of Glass-Stegall, massive default on mortgages, and Wall Street’s “innovative” high stakes investment products…then you got laid off and had no income to spend or invest and that was not good for the health of an economy driven by spending and investment because there were millions just like you.
The financial sector became way too big. Finance financing finance is not a good way to have a healthy economy. We need to be financing more infrastructure, technology, science, small businesses, health care (not insurance), manufacturing and less in ways to play the market like a game of poker.
We need to get back to being a real country again and remove the mental and moral rot that is the insidious influence of Ayn Rand and her putrid kind. We need to think about how what we do affects our children, our neighbors, our grandparents, our nation, our planet, our economy and or ecology which affect one another directly in a myriad of ways.
We need to think beyond our own short lifespans and have some humanity and honor again. The immature little boys that run our public and private institutions need to grow up and become men and learn about the meaning of the word “responsibility”.