Bad Debt
he credit crisis is no longer just a subprime mortgage problem. The current ongoing mortgage problem today had cost a huge impact in our country. There are houses with no one living in, and we have people with no house to live in. As our pricing for homes falling and banks tighten lending loans, we are facing a very difficult problem. But what causes the problem at the first place?
Bad debts, in the recent year banks are trying really hard to make money by lending money to individuals and corporations. Banks gain their assets by giving programs like Subprime Mortgages, Interest-only Loans, Mortgage -backed Securities …ect. For individuals, when one’s credit score is not good enough they offer a higher interest rate. Without checking for the stability of one’s income banks offer high interest rate loans to them. Interest-only Loans, banks give middle-class investors a chance to make money while banks can make more money. Investors with interest only loans always have the assumption that their home could sell at a higher price than their buy-in price.
What is the solution? According to Gretchen Morgenson, The New York Times journalist Published: October 5, 2008 there are two on going solution for this crisis. One is suing Bank of America, he claims,” recently acquired by Bank of America, had been sued by the states over what they said were predatory lending practices. To settle the suits, it will provide $8.4 billion in direct loan relief, affecting an estimated 400,000 borrowers nationwide, while waiving certain fees and setting aside additional funds to help people in foreclosure and relocating.” The other solution is of course the on going controversy of the $700 billion bailout plan. Pro and con side of the argument had some valuable points. One side argues that why use everyone’s dollar to save the people in Walt Street. The other side argues that by saving the Walt Street we can save the United States.
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