Tuesday , 26 May 2020

What Caused the Financial Crisis? 3% Down Mortgages or Wall Street Greed?


3%!  Simply amazing.  3% isn’t even close to serious.  If you are only able or willing to put down 3% you simply aren’t serious about homeownership.  It’s laughable…yet by 2007 40% of all mortgages had less than 3% downpayments…Evidence is now pouring in…that the financial crisis of 2008 was nearly exclusively created by government’s misguided interventions and manipulations of the housing market. [Let me explain further.] Words: 671

So says Donny Baseball (www.sayanythingblog.com)  in edited excerpts from an article*  which Lorimer Wilson, editor of www.munKNEE.com (It’s all about Money!), has further edited ([  ]), abridged (…) and reformatted below  for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Baseball goes on to say:

Gretchen Morgenson’s new book Reckless Endangerment lays out the whole corrupt, government-directed interventionist debacle but the book…doesn’t tell us something we didn’t already know.  Economists and financial markets experts knew exactly how, why and when the government’s insane pursuit of “affordable housing” built up risks in the system that eventually exploded into the financial crisis… [and] numerous financial players saw and organized strategies to profit from the very foreseeable blowup, as chronicled in Michael Lewis’s book The Big Short and for every big name player like John Paulson, there were thousands of little guys who made smaller bets against the housing bubble and made nice gains if not the billions that the recognizable names made.

The One Chart That Explains the Entire Financial Crisis

[While the above mentioned books are] well worth familiarizing yourself with, if you had to look at just one chart to understand it all, Mark Perry today has that chart over at his Carpe Diem blog [and for more insights on the causes behind America’s financial crisis plese go here].

[As I said in my introductory paragraph] 3%!  Simply amazing.  3% isn’t even close to serious.  If you are only able or willing to put down 3% you simply aren’t serious about homeownership.  It’s laughable.  3% would have gotten you laughed out of any bank in America prior to 1994.  Yet by 2007 40% of all mortgages had less than 3% downpayments.  It’s additionally frightening to wonder what that number would be for less than 4% down or 5% down, still totally laughable and unserious levels of equity.

Wall Street Greed?

Mortgage lending to creditworthy homebuyers has been a stable, profitable, and boring business in the United States of America for about a hundred years; so for those who blame “Wall Street greed” for the crisis, I ask you “why now?”  Why did greed not appear, not infect the system, not attempt to seize filthy lucre for that hundred years?  Why did greed only show up at that particular moment in time?

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I further ask why did greed not make its way to Canada, where they did not have a housing and/or banking crisis?  Is greed only a US and highly time specific phenomenon? The answer is that government embarked, at the urging of “social justice” activists, on a policy campaign to degrade the prudential standards that prevailed in the housing lending market.  The government effectively demanded and enforced irresponsible lending, and they got it.  Unfortunately the government can’t repeal the iron laws of economics, so what they got was a flimsy, risk-infected financial system that was bound to crash – which it did.


The government caused the financial crisis and ensuing recession and, as a result, the government has claimed more power over the economy under the auspices of a bill named after two of the most culpable parties – Messrs. Dodd and Frank…

Enjoy your country in the 21st century, America!


Editor’s Note:

  • The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
  • Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.