Sammy on Losing Money

This post is by reader Sammy…

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This is the best summary I’ve seen of something significant happening in our economy right now.

You’re losing money right now. This very minute. You’re losing money if you own an apartment. You’re losing money if you own a country home. You’re losing money if you own a stock or bond mutual fund. You’re losing money if you have a pension plan. You’re probably losing money here or there, you’re probably losing money everywhere (except maybe from your savings account and wallet). But this is no Dr. Seuss story. It’s more of a John Steinbeck tale, and we are the victims, a new generation of Tom Joads, and it’s the damn bankermen who broke us. No, there won’t be a police officer to investigate, and the government, at least this federal government, won’t save us.

Where did the money come from? Banks lent it, mortgage brokers lent it, and even home builders themselves got into the act. The housing markets were so hot the lenders barely had time to check if their buyers were deadbeats, cheats, speculators, or actual honest-to-Betsy hardworking people who wanted nothing more than what Tom Joad wanted 70 years ago. Oh, and the buyers didn’t have time to check out the terms, either; the value of the houses was going up too fast. Gotta close now! Nor did the regulators tap the brakes; whoops, there were no regulators. If something went wrong, who cares? The buyers could always sell their ever-appreciating home to the next guy on the reservation list or the ten after him. The builders, brokers, and bankers then shipped these mortgages east to the big Wall Street firms, which bundled them together and merchandised them as high-yielding bonds often backed up by nothing more than the full faith and credit of, well, no one.

I disagree with the author (I doubt it’s really Cramer) in blaming Greenspan and the regulators. Bubbles seem to be an unfortunate product of free markets/capitalism. Amazingly, I don’t think there is partisan blame here either.

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This post was by reader Sammy