psrock said:
How did Clinton caused this Giant recession? the tax increase? the balance budget? the surplus?
I have heard this idea a lot, but mostly from one side, but wasnt congress Republican controlled?
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This recession was caused by home priced being much higher then there real value. Clinton knew that the best way to increase wealth, was home ownership. So, he stared a subprime lending system, where he told banks to give loans to those who were bad risks, and told them the loans would be guaranteed.
What this did is increase the number of people who could own a home, but the number of homes did not go up, so prices went up. Builders started building. prices were going up so fast, that these loans could be given to people for next to nothing, and then in a few years, they could refinance and just keep going. For this to keep working though, you needed the number of people who can buy a house to always be more then the number of houses there are to buy.
Builders kept building, and the requirements to get a loan kept going down. The problem was once they got to 75% homeowners, the other 25% were so bad, there was no reason to even try and give them a loan. We ran out of people who could enter the market.
Builders kept building. Now we have the number of houses we need for the number of people who can buy them, so prices stop going up. This means all the people who were banking on there house increasing so they could refinance, were in trouble. They started defaulting on there loans. This shut down the program, so the number of people who could own a house went back down to the 60% it has always been.
This means we have enough homes for 75% ownership, but only 60% buyers. Now homes shoot way down in value, far less then they would have been if the program was never started. Even the poor people who kept paying on a home, own a home that is worth thousands less then they paid for it.
This is the example of good intentions (because Clinton had the poor's best interests in mine) going very wrong.
It's why the best way to help the poor, is to give them every tool they need to become not poor on there own, and let them work to not be poor. Trying to game the system never helps anyone.