Federal Reserve Chairman Ben Bernanke acknowledges he was wrong in believing that there would be limited fallout to financial markets from risky mortgages that soured after the housing market's collapse.THE SUB-PRIME LOANS AND GREENSPAN'S RATE INCREASES DOOMED US...
"I and others were mistaken early on in saying that the subprime crisis would be contained," Bernanke said in an article in the Dec. 1 issue of The New Yorker magazine.
"The causal relationship between the housing problem and the broad financial system was very complex and difficult to predict," he said in the piece titled "Anatomy of a Meltdown."
Subprime mortgages made to people with tarnished credit or low incomes were especially hard hit once the housing boom went bust. Foreclosures spiked and financial companies wracked up huge losses as these investments turned bad.
The mortgage meltdown started in the United States in the summer of 2007 and rapidly spread to other countries, as well as to other types of lending, affecting even more creditworthy customers. The problems with risky, subprime mortgages touched off what many call the worst financial crisis to hit the world since the 1930s.
To protect the economy from damage and help ease Wall Street turmoil, Bernanke and his colleagues cut a key interest rate in September 2007 - the first reduction in four years. Some critics at the time thought the Fed should have acted sooner.
Now more than a year into the crisis, Bernanke has taken a flurry of unprecedented - and some controversial - steps to help bolster the banking system and to get banks to lend money more freely again.
- BOTTOM-LINE: FANNIE MAE IS THE ROOT OF THE SUB-PRIME FIASCO.
- IF BANKS HADN'T BEEN REQUIRED AND FORCED TO MAKE BAD LOANS THEN GREENSPAN'S INTEREST RATE INCREASES WOULDN'T HAVE MATTERED ONE IOTA.
- CONGRESS WAS WARNED ABOUT THIS BY BUSH AND GREENPSAN AND SNOW AND MCCAIN - STARTING IN 2003 AND RIGHT UP TO 2007.
- BUT THE DEMOCRATS BLOCKED REFORM.
- BOTTOM-LINE: BY BLOCKING REFORM OF FANNIE MAE, THE DEMOCRATS OF CONGRESS - REID, PELOSI, DODD, AND FRANK - CAUSED THE GLOBAL FINANCIAL MELTDOWN.
- NOW, THEY'RE IN CONTROL OF THE WHITE HOUSE, TOO.