Money Mayhem

From the stock market to the Icelandic banks the financial situation has become sour from a situation that seems vague and often too far away fro the average person. At the same time "Americans retirement plans have lost as much as $2 trillion in the past 15 months" about a twenty percent decrease in value banks like the kind in Iceland are making citizens concerned. The Iceland government took over the Landsbanki bank, a national bank that like many other national banks around the world are receiving bad news over the foggy Wall Street troubles. The bank has invested in foreign debt (particularly American debt in regards to Iceland) and its shown by the 'nationalizing through emergency laws by Iceland government'.

The United States in this manner has not provided the right answer, but at least it's provided something. The whole ordeal obviously started long before this year long before this current administration, Bush, was even in office. It could probably be tracked from the late 1960's to 1970's. However, it starts with the Clinton administration and its need to give every American a home. While a great idea and rather humane, this was the start of the main housing problem. For this to happen requires a push against higher credit scores and lower down payments. This eventually created the standard of no down payment needed and poor credit score. It of course doesn’t stop there. Any business minded person can tell you only a few things can happen here. If more people are capable of purchasing houses and some times more costly houses then the price of houses will drive up higher as demand for houses increase. This only further the thought process that house prices would increase as it had been doing prior.

The Federal Reserve and the actions of Alan Greenspan forced the housing markets to only increase as interest rates and adjustable rate mortgages commonly known as ARMs were encouraged. At a 2004 Credit Union National Association Governmental Affairs Conference Greenspan said:
"Homeowners pay a lot of money for the right to refinance and for the insurance against increasing mortgage payments. Calculations by market analysts of the "option adjusted spread" on mortgages suggest that the cost of these benefits conferred by fixed-rate mortgages can range from 0.5 percent to 1.2 percent, raising homeowners' annual after-tax mortgage payments by several thousand dollars. Indeed, recent research within the Federal Reserve suggests that many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade, though this would not have been the case, of course, had interest rates trended sharply upward."

The collective market of buyers, realtors and mortgages drove the prices up as market depend pushed for more construction. Cheaper credit and low interest rates from the fed allowed for pricier houses to be purchased and average houses to be purchased by individuals who couldn’t afford it driving the debt ratio.

Clinton was not the only administration to let the housing market keep growing in price and trouble Bush was just as guilty. In fact the majority of the housing problems were caused by both parties and both presidents have allowed or encouraged it.