Skip to: Content
Skip to: Site Navigation
Skip to: Search

July 24, 2008 11:24:58 PM CDT

Learn about Newser Points »

« Back to the grid | Next story »

Crisis Is More of Confidence Than Credit

Posted Mar 19, 08 11:39 AM CDT in Business 

(Newser) – The credit crisis that’s roiled financial markets has its genesis in the housing boom that began in 1998, David Leonhardt writes in the New York Times. The boom led lenders to create new financing options—including subprime loans—as investors saw potential for huge returns. Low interest rates encouraged investors, and homeowners, to stretch themselves too thin—and the seeds of crisis were planted.

Wall Street bundled mortgages for sale globally; individuals and institutions bought huge slices of the risky investment on credit. When the pieces began to fall, so did the market, leading to a devastating tightening of credit—as institutions lost confidence in the ability of others to back up promises. Only housing-market resurgence, Fed chief Ben Bernanke says, can turn things around.

Source New York Times

0 comments | Print E-mail | Digg Seed this on Newsvine Add this link to Del.icio.us StumbleUpon

Related Newser Stories

  • Stocks Flat After Roller Coaster

    Feb 27, 08 3:21 PM CST
    Stocks Flat After Roller Coaster Stocks ended mainly flat after mixed news had indices seesawing throughout today's session, the Wall Street Journal reports. Economic news was bad in general, but Federal Reserve chairman Ben Bernanke and housing regulators cheered the markets with upbeat comments. The Dow ended up 9.36 to 12,694.28, the Nasdaq up 8.79 to 2,353.78, and the S&P down 1.27 to 1,380.02. More »

  • New Home Sales Hit 12-Year Low

    Dec 28, 07 11:00 AM CST
    New Home Sales Hit 12-Year Low New home sales fell much farther than expected in November, hitting their lowest point since 1995, Bloomberg reports, and the slide only likely to get worse. Sales fell to an annual pace of 647,000, a 9% drop from October’s revised-down 711,000 rate. Prices are falling, but buyers either aren’t interested or can’t get loans because of tighter credit conditions. More »

  • '08 Subprime Fallout: At Least 1.4M Foreclosures

    Nov 27, 07 11:02 AM CST
    '08 Subprime Fallout: At Least 1.4M Foreclosures The subprime mortgage fallout will continue through 2008, with 1.4 million Americans facing foreclosure, municipalities losing more than $6.6 billion in taxes, and housing values plummeting up to 16%, says a US Conference of Mayors report out today. The analysis projects slowed GDP growth and consumer spending and a rebound in 2009, the Journal reports. More »

  • Subprime Loans Went to Rich as Well as Poor

    Oct 11, 07 9:37 AM CDT
    Subprime Loans Went to Rich as Well as Poor Crunching the numbers on 130 million home loans over the past decade, the Wall Street Journal finds that risky, high-interest loans were extended far beyond the low-income urban borrowers they are usually associated with. Last year, they accounted for 29% of all home loans, up from 16% in 2004. As home prices surged, they were spread throughout all income brackets and geographic locations. More »

  • Plastic May Pose Next Big Threat to Economy

    Aug 26, 07 4:54 PM CDT
    Plastic May Pose Next Big Threat to Economy The subprime mortgage crisis may spark another financial disaster: bad credit card debt. When rates hit 50-year lows, many owners borrowed against their homes to pay off high-interest credit cards. Now, with rates increasing, many may not be able to pay down both their mortgages and their credit cards, the Chicago Tribune reports, and will default or go bankrupt. More »

The housing boom of the late 1990s led to some creative debt options and stretched investors thin from Main Street to Wall Street.   (AP Photo/ Tony Avelar)
The housing boom of the late 1990s led to some creative debt options and stretched investors thin from Main Street to Wall Street.   (AP Photo/David Zalubowski)
The housing boom of the late 1990s led to some creative debt options and stretched investors thin from Main Street to Wall Street.   (AP Photo/Damian Dovarganes)
A property is offered for sale at reduced price Wednesday, Feb. 13, 2008, in Los Angeles.   (AP Photo/Damian Dovarganes)
« Prev« Prev | Next »Next » Slideshow
Our editors also recommend:

Threads (1 of 6)

Tags

subprime mortgages  • credit crisis  • Ben Bernanke  • Bear Stearns  • home loans  • home sales


Loading...

Loading...

Today's Most Popular


Other Business Stories

What is Newser?

2008 Codie Finalist

Newser gives you more news in less time. We search for the best and most important stories all over the web, read them for you, and deliver concise and sharp summaries—along with links to the full text. Newser provides a way to stay on top of an ever-expanding horizon of news and opinion—politics, sports, business, trends, technology, personalities, crimes, and controversies. Newser keeps you not just better informed, but, with our signature graphic interface and smart condensed format, more enjoyably informed.

Learn more »