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Subprime borrowers and Wall Street bigshots
Originally published at www.thedollarlama.com
The New York Times reported on Saturday that Bear Stearns is acting to bail out one of its investment funds (Bear Stearns High-Grade Structured Credit Fund) as it experiences investment losses related to the subprime loan market.  Here we see two opposite ends of the financial spectrum, acting together in their own shadows.  Follow me for a moment:  Subprime borrowers are those with poor credit, who cannot qualify for traditional mortgages.   In the aftermath of September 11th, 2001, interest rates plummeted and borrowers who could not otherwise have afforded to buy homes flocked to home ownership through subprime loans.  This drove home values up, allowing more established borrowers to take out home equity loans or lines of credit and spend, spend spend in our economy.  We showed those terrorists -- our economy leaped to life, our real estate surged in value and people who had never owned their own homes owned real estate.A quiet look at how these loans are structured shows that they're not intended to be in place for very long -- after a couple of years (presumably during which time the borrowers have managed their money better than before and improved their credit scores, qualifying ... more

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