There's an artificial demand for jobs and home ownership?

Regardless, the housing bubble is not the reason for the crisis. When the dot.com bubble burst far more money was lost than has been lost so far. The problem is the B-Paper mortgage's were rolled into CDO's, the CDO's were given ridiculous bond ratings, investment banks were allowed to keep the CDO's off their books using SPV's, the bond insurer's were undercollateralized and the S.E.C. failed at creating even the semblance of some oversight or guidellines for GAAP that were connected to reality.

The Fed is primarily interested in keeping the business cycle in check. That's why it was created. We want low inflation and low unemployment. And what is your definition of artificial? Do you mean that there should be no government regulation in markets at all because that would be "artificial"?

dp

I agree with too.

Hey, get your wide-angle views of the situation out of here!  We don't need them!

Why does the government need to subsidize retards that live well beyond their means?

That's what the bailout amounts to. People bought homes they couldn't afford, and had to default on it, leaving the bank with a house it could not sell, and a debt it could not repay.

Even though banks are at fault for giving loans out to any person that could sign their name, it was ultimately up to the potential American homeowner to realize that having a high-cost mortgage isn't the smart thing to do.

I say let the markets hang and don't bail them out. This is the next step in American socialism, and I'm very worried about it. The government doesn't have the responsibility to bail the wealthy homeowner out of their recklessness.

Why? My fiancee's family, and my family are both "victims" of predatory lending - her family almost defaulted, and mine is on the brink of it. Why? They were retarded and bought $150,000 homes on

Plus,
"Sept. 29 (Bloomberg) -- The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.

The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed's emergency loan program, will expand by $300 billion to $450 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.

The Fed's expansion of liquidity, the biggest since credit markets seized up last year, came hours before the U.S. House of Representatives rejected a $700 billion bailout for the financial industry. The crisis is reverberating through the global economy, causing stocks to plunge and forcing European governments to rescue four banks over the past two days alone."

Bernake spent $630 billion and it did nothing! Another $750 billion will do nothing.
We can save that billions and spend it when the people of this great nation need them.

What I mean by artificial is that the demand would not exist under normal circumstances. How can you not blame the housing bubble on the financial crisis? If people did not default on their loans, none of this would be a problem. You may mention CDOs and bad practices by the rating agencies, but they were all the result of the Fed's mismanagement of the money supply. In 2004 the fed funds rate was still at a shockingly low one percent- a level that had not been seen in over forty-five years. The real fed funds rate was actually negative for almost three years. That was not seen since the mid-70s, and we all know what happened after that debacle. 

I am glad the Federal Reserve is here to fight inflation. I suppose by all measures they are succeeding. 

http://www.economics-charts.com/cpi/cpi-1800-2005.html

Its not quite that simple.  The subprime mortgages are a problem, but that not the biggest problem.  Its the subprime mortgage derivatives that have made this a MAJOR problem.

http://financialsense.com/fsu/editorials/amerman/2008/0917.html

Foreclosure rates are high, but not near high enough to cause the problems we are seeing now.

I think the economy needs a good wake-up slap. There is no point in giving an 85 year-old man a new heart.

But I also think we need a WWIII... so my opinion is radical. :P

CDO's were not a result of of the Fed's mismanagement. The management of CDO's is handled by, surprise, no one. They are not regulated. Bad practices by the rating agencies are just a fact. Supposedly a bunch of B-Paper turned into a CDO magically got an investment grade rating. Are you saying they are regulated by the Fed? Are you prepared to discuss credit default swaps or credit derivatives that use CDOs as their reference entity?

This started about this time LAST YEAR. That's when the housing bubble started popping and banks were taking big hits, and people were getting fired. There was plenty of time (compared to the 4-5 days Paulson has given us now) to do something. All of the major players understood that this debt was toxic. I'm pretty sure that all the B-Paper companies went out of business at that time. But all those loans are linked together by those CDOs. Which are in turn supposedly insured by the credit default swaps.