Wall Street Blues

What’s the idea of borrowing, to obtain or receive something on loan with the promise or understanding of returning it or its equivalent. In the United States there are large amounts of borrowing in the entire economy. Each month a bill has to be paid, but mostly of those bills are unpaid. Banks rely on those payments so they can keep lending to other people. But when payments are stopped, there would trigger a financial crisis.

On September 15, one of the nation’s biggest investments bank (Lehman Brothers) announced that their closing downing, because they had lost so much money from bad loans. Within days, there had been two other major banks announced that they were taken over by rival banks. So to save the economy form a collapse the U.S. Treasury proposed a $700 billion bailout to rescue the nation’s troubled banks. President George W. Bush had told the nation on September 24 that “We’re in the midst of a serious financial crisis, which our entire economy is in danger.”

How this happened in our economy was by the people that wanted to buy homes that they couldn’t afford, and banks found a way to let them do it. Banks created home loans called subprime mortgages, is a loan given with less than ideal credit. After this home owners no longer could afford paying the rising mortgage. Which banks began losing money quickly? Closing down the mortgages and also took away the houses. The houses that were taken away they tried to sell them, but were worth less. Making banks lose more money.