Thursday, March 26, 2009

Cause of the financial crisis


By: Allison Franklin


With the financial crisis the main topic on every news program and the headline on every newspaper it is hard not to think about and notice what is happening. However, the root cause of the financial crisis is rarely discussed. Most financial advisors believe that the main cause of the financial crisis was the housing market boom and collapse. So many people were buying houses and the prices of them were escalating. This caused the demand for loans to increase. Banks wanted to get in on the action, so they were willing to lend to just about everyone who wanted. This worked for a while, but as these unconventional mortgages came due and people were unable to pay, banks found themselves in trouble as they were not being paid back. This lead to houses being in foreclosure and the downward spiral of the economy began. If during the housing boom banks were cautious to who they gave loans to this recession might have been prevented or may have been less catastrophic. Everyone knew that the housing bubble was going to burst and one day this was going to happen, so why didn’t anyone try to stop the banks from doing what they were doing? The simple answer is money. Everyone was looking at the short term picture of the money being made and did not care about the long term sustainability of the economy. Now, because of the greed our country is in debt and our people our suffering.


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