They profited from the collapse while the “main street” economy continues to suffer from it today.
Who is “they”? The BANKS didn’t profit; they got fined billions, their stock prices took it in the shorts, and that’s assuming they didn’t go bankrupt. A small number of the summer-in-the-Hamptons crowd who were actually trading those desks? Yea, “they” profited big time.
There was no market bubble.
I’m not going to get into semantic games here.
1. An economic cycle characterized by rapid expansion followed by a contraction. 2. A surge in equity prices, often…
Those “investments” were destined to fail and once the investment community caught wind of what was going on the banks could not rid themselves of the inventory they had in those bad mortgages that they had created specifically to sell off the risk.
I don’t agree with the term “destined”. If you look back in 2006–7 history, you’ll note that the beginning of the crash, which preceded THIS event by a short period of time……
….started when Bernanke raised interest rate for the first time in LONG time, resulting in an inversion of the yield curve, because the long-term investors saw the writing on the wall:
How Bernanke's Fed Triggered the Great Recession
As usual, when Fed chairman Ben Bernanke testified before Congress this week not a single Congressman asked him why he…
So, what happened when Bernanke raised interest rates? I think you know. A TON of those crap mortgages had adjustable rates. When Bernanke raised rates, those adjustments repriced, leaving the people (who had qualified for the loan under the “teaser” rate, and never had a chance of making the payment under the repriced payment) unable to roll over their loans. Those loans went into recievership, boosting the supply of housing in the face of shrinking demand….and…baddaBOOM!.
So, not “destined” in the sense that they KNEW these things were going to go bad. However, if there was better oversight from the risk managers, they would have been told to knock it off, they were writing risky loans. They unwisely never expected housing prices to depreciate (it amazes me that there are still loads of people out there to say “invest in real estate, it never goes down”. Yea, right.)
In my view, it was worldwide fraud that brought down numerous countries, as well as individuals. Fraud institutionalized within the US and European banking system.
I don’t see the fraud; I see stupidity. The derivatives were built according to Modern Portfolio Theory; they were solid unless a black swan event occurred. Well, whaddya know. The black swan event occurred.
BTW, Canadian housing prices are nosebleed high (they never dipped from the 2008 crash) and everyone has been expecting a crash for the last 4 years.
WHERE are they nosebleed high? Vancouver, Toronto, and Montreal? I’ve had reason lately to consider real estate in Guelph and Waterloo, and pricing in those areas is US-rust-belt reasonable.
And to add to all this the Republican controlled House has doubled down on deregulating the banks again, just yesterday. I do not expect it will sail thru the Senate and become law thankfully, but when money is involved some otherwise smart people have very short memories and do very stupid things.
Well, suffice to say that Dodd Frank addressed precisely none of the factors that led to the events of 2008, and caused a load of negative unintended consequences in the meantime.