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A Brief Explanation of the "Subprime Loan Crisis"

Posted by libhom Friday, December 11, 2009

man with sign that says bust the bankstersIn comments on a post on Progressive Eruptions, I finally bothered to write a concise explanation of the predatory loan crisis. I thought I would repeat it here, edited a bit for clarity.

"Subprime loans" is a euphemism for predatory loans. The loans that sparked the crisis were designed not to be paid back. The banksters deliberately designed them with huge interest rate escalations which were much, much higher than those in traditional ARMs.

The scam was to force people out of their homes in order for the banks to make money after selling them in foreclosure. What went wrong for the banksters? They got too greedy. They issued far too many of these mortgages which all failed within a relatively short period of time. That caused housing prices to plummet, and the mortgage paper which was based on these predatory mortgages went bad.

You won't read points of view like this in the New York Times.

Photo: dorkula (Carrie Sloan)




  1. Lew Scannon Says:
  2. They should have all been thrown in jail, instead getting bailed out by the Bush administration.

  3. yep - they are all criminals

    i hope you dont get the slappz troll who will blame everything on the Community Reinvestment Act



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