WAMU and The Housing Crisis: Let's break it down for y'all.
WAMU: Keep your eyes shut
while we change ownership.While the ongoing subprime mortgage crisis is happening, I can't help but to think of the ways this will affect the nation, our economy, the election, and the way we can fix it.
Here's a nifty diagram for all you interested folks via Wikipedia at the Subprime Mortgage Crisis page.
What's happened is that housing prices went way up above what they're actually worth. House builders tried to cash in by building tons of new homes. And banks lowered their rates to entice people to take out mortgages. With all this new money in homes, things would be perfect if prices could keep going up and up forever. That's why they call it a "bubble": it's gotta pop. The moment real estate agents found they weren't selling enough houses, prices dropped. And with that, the banks' investment in the housing market dropped as well. Washington Mutual was the biggest mortgage dealer in the US.
The crisis is not a full blown problem. It's only contained in the housing market. That's why WAMU fell and not JPMorgan Chase (which ended up buying WAMU's $300 billion in assets for $2 billion). Though, you start to wonder...where and when will we feel the ripples?
If anything is incorrect or not accurate, please comment.
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Of course, everyone is debating over the financial crisis and why WAMU went under and if we're going to end up in another recession, or even another Great Depression. For all we've done to make things easier for the working class (which isn't much), I can only assume it's going to be way harder for us if we don't work on something fast. But will a 700 billion dollar bailout be enough?
I believe that this recession is not something that will go away if we pour money into the economy. The stimulus package was nice, but it's done zilch because a gas tank costs $45 and a mortgage costs hundreds of thousands. The 700 billion dollar bailout will be nice and might put off the recession, but will probably be squandered. I also have a theory that when people receive a lot of money, they'll tend to run with it, not thinking about others.
In times like these where people feel like they don't have control over their lives, they turn to the government for support. And it's easy to pass on responsibility and give the government freedom to do whatever it sees fit. To me, that's what happened after 9/11. The presidency took that power to dictate a country and ran with it. Here, at this very moment, it's easy to pass up financial responsibility to one man, the Secretary of Treasury Henry Paulson, a man as closely tied to mortgage dealer Goldman Sachs as VP Dick Cheney was to Halliburton.
And at this point, it's easy to pass up responsibility to a certain presidential candidate to make the change for us.
I guess what I want to say is that our society runs on our total contribution, not the decisions of one man. To me, even if recession hangs in the balance by what gets or doesn't get passed today, it's still better than hastily passing a shitty bill that hasn't learned anything from our past mistakes.
Note: on the lower right hand of the Wikipedia diagram it says "Enhanced Disclosure". I like that. Someone should show this to our Senators.