From Trap to Crunch to Assimilation - The Great American Power Lunch | WHAT REALLY HAPPENED


From Trap to Crunch to Assimilation - The Great American Power Lunch

Let’s start with the financial definitions of prime and subprime. Loans to people with good incomes and credit records are classed as prime. Loans to people with low incomes and bad credit ratings are called subprime loans. By the law of the banking jungle, since there were many prime loans three years ago, recievers of these prime loans were allowed to start paying low and then later on pay higher rates. The jungle too, dictated that since home values were going up, people could just refinance their loans, which is basically getting a new loan to pay off the one they had already, replacing it with one with a better payment plan. Or they could just sell some property to cover their hind ends.

Those were the good old days. The problem is that big financial giants like Lehman Brothers, Citigroup, Goldman Sachs, IndyMac, Freddie Mac and Fannie Mae cook the books to make themselves look financially solid as routine business. And so they can stay in business.

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