Upside Down Mortgage

Wikipedia Subprime Crisis

Question: What is the Wall Street financial crisis?

I think I'm not old/smart enough to understand those economic terms in Wikipedia, Newsweek, Time and other websites. I've always been interested (piqued, actually) by the 2008 crisis, but the more I research about it, the more it gets harder for me to understand. Can anyone explain to me in simple words, what's happening? Even just a small background will do.

I bought Time's "The Price of Greed" issue but i just can't seem to grasp the "idea".

I don't know even know what CDOs are! It's not like they teach that in school.

further, i don't even know what the subprime mortgage crisis is.

PLEASE help me! I'm actually dying of curiosity!

Thank you!

Answer: Many bank managers and executives concocted up a scheme where they would lend as much money as they could to every Nick, Joe, and Shmoe they could find on the street. And then reward themselves with many millions of dollars in bonuses for work well done.

These bankers didn't care if the people they were lending to could pay back the money or not. Because these bankers were giving themselves big bonuses as soon as they've made the loans. And they didn't have to give back any of their bonuses, when it turned out that many of the borrowers couldn't pay back their debts.

Basically, it was a complicated but legal way for bank managers to rob their banks and share the loot with passers by in order to keep everyone quiet.

And now the whole economy is in trouble, because the banks have lost a lot of money. And they can't lend any more even for normal business.

Here is what the recipient of the 2006 Nobel Prize for economics says:

"That the banks chose to take on ever-greater levels of risk, with no end in sight until the collapse, was an effect of employee compensation: Fortunes could be made for each additional day that the bank could operate. There was no claw-back provision that would pay bonuses only for performance over the long term."

http://www.spiegel.de/international/world/0,1518,590030,00.html

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