Mortgage Crisis Raises Recession Fears

When large banks like 'Citibank' start to lose billions of dollars because of the sub-prime mortgage market, then even regular people start to take notice. While 'Citibank' and other major banks are trying to put their best face forward in this mortgage meltdown, many well respected analyst are saying that the worst is still yet to come. Anyone with one lick of common sense could have seen this mortgage crisis coming from a mile away, but just like the fun days of the NASDAQ ten years ago - everyone was too busy making short term money to realized that at some point in time there would be a 'day of reckoning'. That day has come and many of the largest banks in the United States and around the world will suffer because of their lack of restrain in lending money to people that should have never qualified to buy a home.

Several months ago, while driving my car, I heard a radio announcement that went something like this: 'we don't care about charge offs or bankruptcy when judging you for a mortgage'. When I heard that radio ad, I knew that the mortgage market had become the latest bubble to hit the United States and I also knew that the pain would be felt far and wide once the full extent of that damage filtered through the U.S. economy. If large banks like 'Citibank' and huge brokerage firms like 'Merrill Lynch' are suffering this badly, can you image what is happening at smaller companies right now that has yet to be reported on the local news? A few decades ago I took a few real estate courses in college and at that time there was a time tested formula for judging the credit worthiness of potential home buyers. Somewhere along the way banks and other mortgage companies forgot these old rules and went for the quick buck and that is why the whole mortgage industry is in free fall right now.

This whole mortgage crisis would not have been possible if Alan Greenspan did not lower interest rates to levels that had not been seen in generations. Yes, the U.S. economy was suffering and rates needed to be adjusted downward. However, the amount of this drop cause everyone to quit saving money and pour their life savings into the real estate market for quick profits on money invested. Flush with investment cash, banks and other mortgage leaders tried to find mortgages for as many people as possible just to supply the incoming money stream. Some of these lenders did not care if the people getting the mortgage would eventually pay it off or not, because they were blinded by short term profits that were through the roof. I believe a bad recession is on the horizon and many Americans are going to be hurt by the greed of some that threw out common sense for a quick profit. Without government watching the financial markets these type of events will continue to happen and hurt all of us in the long run.

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