The Truth Behind Bad Credit Loans
There’s an abundance of “truth” in cyber space about what really happened with these bad credit loans and who is to blame. Fingers get pointed everywhere. The axiom to “follow the money” would hold true in this case as well as we assess the blame for this lending debacle. On the surface, it would seem that greedy investors got the money and so the blame should be leveled at them for their deceptive and fraudulent applications. It’s always easiest to blame the first in the line of the transaction when looking for a culprit. But they didn’t really end up with the money. Follow the money!
Did anyone note the huge rise in “paper traders” and little mortgage companies that seemed to materialize out of thin air in the middle of the last decade. Thousands of people invested in these businesses, got licensed as mortgage officers, and rode this wave to the crest. Bankers made huge profits and commissions and bonuses. These lending institutions were really on a roll and property valuations kept coming back higher and higher. Realtors made some serious money, but they were only there where they always have been. Realtors would soon feel the axe like the rest of the nation. So where did the money trail lead from these bad credit loans?
it’s not far amiss to point the fingers at bankers. After all, they made the bad credit loans. They received billions in revenue and even more as they traded and bought the “paper.” After all, loans are merely paper and only represent money to the poor smuck who has to pay it. These lending institutions kept turning the loans and creating more profits. Mortgage companies grew up overnight with huge promises. This money trail definitely heads to the banks and some big ones out there. When that bubble burst, the banks cried foul and were the first in line to clamor for help. In all fairness to the banks, it’s true they made huge profits and they should have to take the fall rather than the bailout; but, the money trail didn’t end there.
We follow the money right to where these bad credit loans and lending policies originated. Entities like Fannie Mae and Freddie Mac with mounting pressure from the Fed, relaxed lending policies that had been in effect for many years. Even to this day, amid near economic collapse and chaos and bailouts, the Fed shines through. This private institution of heavy hitters in the economy continues to make staggering profits in this desperate recession. Follow the money and that’s where it has led.
