View Full Version : Who caused the economy crash in USA?

10-22-2008, 09:31 PM

So who u think caused the economy to crash. I think it would have to USA war policies and Bush....but i don;t understand how could people reelect Bush after what he did in his first term....So what are your thoughts.....

P.S. I am Canadian!!!!!

10-22-2008, 09:33 PM
Well, Bush didn't really do any thing in his first term. Stuff happened to him and the American people. In essence, people think he sucks because it happened as soon as he got ellected.

10-22-2008, 09:37 PM
Basically the economy crashed due to a mixture of bad political pressure and greed on behalf of the banking system. The political pressure was mostly from the liberals urging banks to decrease lending standards on these "sub prime" mortgages.

Long story short, when the housing market collapsed these assets (mortgages) lost their value both to the banks and to their holders, so the holders defaulted, causing the banks to lose profit, which caused big ratings companies such as Moody's to downgrade them. This set off investor panic which sent the stock prices into the basement. Some companies collapsed (Lehman Brothers) some were bailed out (AIG) because they fell under the concept of "Too Big to Fail".

The black hole created by the banking system breaking down spread to the credit system. When the credit system got messed up, retailers like Abercrombie and Fitch and other retailers which fall into the "Consumer Discernable" sector (basically means its not needed for living, i.e luxury items) saw their bottom lines drop out which again sparked panic.

In sumary, we did this to ourselves. No one person is responsible, and Bush sure as hell couldn't have just stopped it on a dime, so no one go blaming him for this mess. If anything it was Democrats who put the pressure on the banks. If you don't like the Democrat idea, blame the banks then for going along with this stupid scheme of subprime mortgages to begin with.


10-22-2008, 09:46 PM
IMO it's all the greedy businessmen who give out house loans' fault. They knew some people wouldn't be able to pay off the loans, but they gave the loan to them anyway, since they profit off of it (until the foreclosure comes along).

And then the bailout makes it worse. First, it saves the guys who messed it up in the first place by being greedy. Second, it gives people false hope. And lastly, wastes a ton of tax money.

And the war is the Democratic Congress' (I say Democratic because they hold the majority) fault as much as Bush's. Even so, I think they did the right things. What would you have done (beginning with 9/11)?

Dan Cardin
10-22-2008, 10:17 PM
Bush started out with the highest ever approval rating and had the full support of everyone going into the war. It was only after people started dieing (and there are still less than 5k dead (afaik), which is much, much less than any other war) and it started to go sour when people started saying they thought the war was a bad idea from the start and it became unpopular.

And everyone blames Bush for everything when congress has a democratic majority, so its really not even Bush's party that controlled what was being done. Bush can only pass what's given to him, so it had to go through the democrats to even get passed along to him.

So really Bush has nothing to do with it. Its like Jimmy Carter, now people agree that Carter sucked, but it was because he had his hands tied behind his back, because of Congress' majority. Same thing, basically. So dont blame Bush, blame the silly, greedy people that lent loans to people that they knew couldnt pay them back.

10-22-2008, 10:53 PM
I think it was runescapedoom3

I heard that guy is a jerk :rolleyes:

10-22-2008, 11:30 PM
It was a combination of Federal Reserve policy coupled with Fannie/Freddie coupled with a failure of the bond ratings system (many bonds based on subprime loans were rated as Triple A?), coupled with greed in the banks.

If you take away the ultra low interest rates year after year from Greenspan and the Fed, then housing prices wouldn't have bubbled up as much as they did.

When Fannie and Freddie were buying up over a trillion dollars in risky loans, it broke the link between SELLING a loan and SERVICING that loan. It doesn't make sense for banks to make risky loans because the default rates make them unprofitable. But if you can sell the loan, pocket a bunch of money in fees and commissions, and the hand it off to Fannie and Freddie to socialize the risk, suddenly they're extremely profitable.

The bond ratings were based on the assumption that there wouldn't be a cataclysmic implosion. It's understandable that Standard and Poors and other rating agencies would assume that the market would continue functioning in a normal way, and it didn't. They lost a whole lot of credibility over this, because they really should have known better.

And the greedy banks made it worse. I don't blame them for selling loans when the government was essentially handing out a trillion dollars of free money. If you don't get it, one of your competitors will. But they made it all much, much worse by gambling on derivatives (credit default swaps). Of course, Fannie and Freddie were also gambling on derivatives, and lost tens of billions of dollars on them.

If I had to rank them in order from least important to most important cause, I would say it would be "greedy banks" least, then bond ratings, then Fannie/Freddie, then the Federal Reserve.

randy marsh
10-23-2008, 12:58 AM
People burrow money they cant afford to pay back!

10-23-2008, 02:10 AM
Its the fault of banks, and company's that started giving Loans to people with bad credit, Bush had nothing to do with it, it was then the Congress, that made the decision, not Bush.

10-23-2008, 02:20 AM
Variable interest rates played a big part, in addition to what everybody else said.

Because interest rates were variable, if a person bought a house or car or whatever else they needed a loan for, they were given a down payment, and a ppm along with an interest rate. But because interest rates were variable, two years later the interest could be 3% higher than it was two years beforehand, resulting in lots of people not being able to pay their debt. Thus resulting in businesses going bankrupt, real estate dropping, etc.

0 down payment also played a part, because people could buy a house even if they had no cash, simply adding to the problem.

10-23-2008, 08:09 PM
alot of people

they said this was building up and building up and than finally it blew and caused this.

the question is when is this going to get betteR?

nobody u kno
10-23-2008, 09:17 PM
Two Words:

Bill Clinton

10-23-2008, 11:33 PM
Its the fault of banks, and company's that started giving Loans to people with bad credit, Bush had nothing to do with it, it was then the Congress, that made the decision, not Bush.

But you have to remember that historically, when a bank gave out a risky loan, they LOST MONEY. It's not profitable.

The only way it became profitable was to sell them to Fannie and Freddie, or bundle them into securities and sell them themselves. Fannie and Freddie were the biggest bundlers in the country, because the government created them specifically to buy risky loans and bundle them. The banks also bundled loans themselves, and resold them as bonds. The only reason they were able to sell those bonds was because the bonds were given higher ratings than they deserved, and were viewed as safe investments, when they fundamentally weren't.

Yes the banks were greedy, but banks have ALWAYS been greedy. If bank greed was the root cause of financial crisis, we would be in an ongoing crisis every year for the last millenium. So this crisis was not caused by greed, but by the other external factors that unleashed that greed by making the sale of risky loans profitable.

10-23-2008, 11:59 PM
Two Words:

Bill Clinton

Two Words:

Uninformed post.

If you can't back your claims with substance and instead just choose to spout some conservative agenda, then this isn't the debate thread for you. As you can see, all our posts are long and somewhat detailed with supporting theory. Yours is just sad.

10-24-2008, 12:47 AM
Meh. I don't think it's Bush's fault at all.

He may have had some decision, but at the time it was the right thing to do.

Maybe not the entirely right thing to do, but it was the thing that needed done.

Here's one thing I can say that I am definite about:
We will never stop wars in the Middle East. It's been happening for centuries.

10-24-2008, 01:05 AM
Its funny how it all occurs near to the election though, could it not be a set up for publicity? whoever can "fix" the problem :S

10-26-2008, 05:52 PM
Its funny how it all occurs near to the election though, could it not be a set up for publicity? whoever can "fix" the problem :S

I couldn't agree more. A little too convenient.