link: http://www.arthurmag.com/magpie/?p=2825Riding Out the Credit Crisisby Douglas Rushkofffrom Arthur Magazine No. 29/May 2008 Here's a really excellent rundown of what lead up to the credit crisis for those people (like me) who aren't already self-made scholars on the topic. In short, there was a surplus of credit in the system. Americans were encouraged to borrow in the form of mortgages, which created demand for the credit banks wanted to sell. In many cases the credit itself wasn’t even real, but leveraged off some other inflated commodity that the bank or investor may have owned.
Banks and mortgage companies invented some really shady and difficult-to-understand mortgage contracts, designed to get people to borrow more money than they could . Banks didn’t care so much about lending money to people who wouldn’t be able to pay it back, because that’s not how they were going to earn their money, anyway. They provided the money for mortgage companies to lend, and in return won the rights to underwrite the loans when they were packaged and sold to other people and institutions.
So a bank might provide the cash for a bunch of loans, but then get it back, plus a huge commission, when those loans were packaged and sold to someone else. Douglas Rushkoff appears in C-Realm Podcast 29: Corporatized.  Tags: credit crisis, douglas rushkoff
|
![[info]](http://p-stat.livejournal.com/img/userinfo.gif){kind=small}
kmo's journal
