WhoTooted

I feel like it's a lot more likely there just isn't very much "big" money in the klan.

But, Broward nearly always has issues, so...

I'm not even in banking, but it pisses me off when people throw the entire financial crisis at the feet of the banks. The "banks" like we like to think of them weren't the main cause of the crisis. Did they play a role? Certainly, but so did a large majority of the American people!

Let's break down what happened:

1. The government wants people to be able to buy houses, so when a local bank gives out a mortgage the FEDERALLY sponsored Fannie Mae and Freddie Mac buy that mortgage for local bank Joe Schmo, bundle it up with a bunch of other mortgages and sell it to someone. This allows Joe Schmo to give out more home loans, allowing many, many more people to buy houses.

2. The credit rating agencies LOVE these mortgage-backed securities. They're stamping them with AAA ratings, so they can now be sold to the biggest pension funds and money markets in the world.

3. AIG thinks they have some stroke of genius and begins selling CREDIT insurance. Everyone is doing so well, how could this possibly fail?

4. The dot-com bubble burst, keeping interest rates EXTREMELY, and artificially, low for an extended period of time. This, combined with government legislature, basically made it so anyone and everyone could get a loan.

Let's go over how these four things interact. Everyone and anyone can get a home loan, the local banks don't care that they are giving these loans out to sub-prime borrowers because the government sponsored Fanny Mae and Freddie Mac are going to buy it from them regardless. Then, FMx2 is going to pass these by the credit rating agencies, who are going to stamp them with "SO FVCKING SAFE THEY MIGHT AS WELL BE US GOVERNMENT FVCKING BONDS" ratings. The banks see the rating, have no idea where the mortgages came from, and say "Fvck it, we have credit insurance anyway, so who gives a shit? These mother fvckers give us way better returns and are just as safe as government bonds, we're definitely buying as many of them as we can."

Now you have created huge demand for these mortgage-backed securities, and the local banks are handing out as many loans as humanly possible. Demand for housing has spiked through the roof, but obviously supply is slow to catch up, so prices are rising. The housing bubble has officially started to build. These things compound, the local banks have started to run out of people to loan to and housing prices are a lot higher than they were five years ago, so they hit up people who have loans on houses whose value has supposedly doubled. They get them to refinance, but now the rates aren't so low...the government has raised them back to near the historical average ~6%. Foreclosures begin, all of the sudden supply catches up with and surpasses demand, and housing prices plummet. Now you CAN afford to pay the mortgage for the house you just refinanced...but that loan is for more than double what your house is worth. Your net wealth can't even make up the difference, it makes more sense for you to accept foreclosure than it does to keep paying...add another house to the market.

Now foreclosures have spiked, and these mortgage backed securities aren't looking so "risk-free" anymore. The investment banks have loaded up on them and have no idea what to do with them. They aren't so worried, they're insured by AIG right...? Naaa, FMx2 goes down and AIG can't even cover their ass, let alone every other major financial institution in the country. Credit shrinks up and all of the sudden the likes of GE and McDonald's can’t even fund daily operations. Boom. Financial crisis. The government can either make the banks solvent enough to free up credit, or let the majority of the free-flowing cash in the economy come to a screeching halt.

So whose fault is it? The government’s for interfering with a market that naturally would have kept itself in check? The credit rating agencies’ for stamping the mortgage backed securities with ratings far too high? AIG for selling out insurance that was OBVIOUSLY prone to systematic risk? The investment banks for trusting the ratings and the insurance they bought and seizing an opportunity to provide investors with much better returns? Or maybe the American people, for living far beyond their means? It’s not so simple an answer as just saying “mumble, grumble, fvck the banks, give me karma”.

If you don't mind me asking, what kind of pay do you receive as a portfolio manager in Ukraine? That position would pay quite well in the US.

Like the author of this AMA stated, this is the MAIN explanation. I'm not sure how you could blame it on socioeconomic issues without bringing up any socioeconomic data. Florida does not have a very unique socioeconomic situation compared to much of the US. It's a very average state.