Mortgages

During the 1950's when I was growing up and bought my first home, most home loans were from local banks who held the loan and were at risk if the home owner defaulted. Because of this the banks were careful as to whom they offered loans. They had guidelines, things like minimum down payments and income requirements. In the 1980's institutional investors created mortgage bonds. This meant that local banks could sell local mortgages to Wall Street investors and not have to worry about defaults which of course led to easy loans. In about 2006 or 7 Wall Street greed for these new mortgages led to the home market collapse and about 5 million people lost their homes. The government looking for a solution encouraged Wall Street to purchase these homes at large discounts. Wall Street saw this as a way to make money and created Real Estate Investment Trust (REIT's) and started buying up homes but they didn't buy them to resell they bought them to rent and they are now profiting from REIT's. The housing crash has now come full circle. It was Wall Street that caused it and Wall Street is now profiting from it. For those too young to remember the same thing happened with the savings and loan (S&L) crisis of the 1980's which was precipitated by the junk bond scandal. The government delayed in closing down bankrupt S&L's which cost the government hundreds of billions. When all the dust settled the government created the Resolutions Trust Corporation (RTC) to dispose of the failed S&L's and these were most often sold back to the original investors at ten cents on the dollar so once again those responsible for the problem profited from the problem. Not much was done to help the millions of little people who suffered loses.