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Originally Posted by flstf
I hope you are right. The rally this morning and yesterday afternoon seems to be in response to more government oversight. I have a hard time understanding how these large banks and insurance sompanies can be going belly up. Wasn't it obvious that real estate prices were going to fall/correct? Isn't it now obvious that they will fall until the average wage earner can afford to buy with a standard mortgage? Why didn't the leaders of these companies see this? Something is very wrong.
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Greed is a given. The problem began with Fannie Mae and Freddie Mac creating a secondary market for mortgage loans. These institutions used leverage to over-extend the industry. They had the benefit of getting below market money to buy and package loans that they could sell at market rates. They had no incentive or reason to stop doing more and more. The irony is that we have known for years that these organizations were bankrupt, depending on how you valued the underlying assets, or at the very least unreasonably leveraged. The Bush administration actually tried to reform these organizations but was not able to because of Congress.
-----Added 19/9/2008 at 01 : 35 : 25-----
Quote:
Originally Posted by ratbastid
The economy neatly follows the rules of narrative fiction?
That's a great little fantasy. Real life isn't like that.
Here's one challenge to the analogy: when is this movie supposed to be over? When is the denouement? When exactly will we look around and say, "Hey, everybody! We MADE IT!!"? A year? Ten? What will the next day be about, a sequel?
LIFE ISN'T LIKE THE MOVIES.
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You think there will be an end to "Rocky" movies? I think I rented Rock XV last week or was it Rock VI, not sure, but I loved it.