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Sub Prime Mortgage Crisis 2008Some things never change...I never thought Wall Street would really matter to me, but...
The Wall Street Stock Exchange is the hub where all companies stock is traded, bought, and sold. Now most of it is done online, but Wall Street is still the center of the business world. The whole process is basically gambling, investors can buy stock in a company like Apple for instance, if that company is doing well their stock rises. If they struggle their stock falls and the amount of money you invested falls as well. Many of your parents probably have retirement accounts called 401k's where their money set aside for retirement is put in the stock market(we will get back to that). This is how history and decisions that impact us never stop. In 1933 Congress passed the "Glass-Steaggell Act" after a depression had wiped out half the countries banks, unemployment was at 25%, and many Americans had found their banks and their money in them gone. The law made it illegal for commercial banks to make risky investments with customers money. Well in the 90's Congress and Bill Clinton decided they would take away the law to boost the economy. Well in the years after we started to see banks give out more risky loans to home buyers, here is an example. Sub prime loans are agreements a home buyer makes that give you an adjustable rate interest and a chance to buy a home with no money down. After a number of years the bank can jack up the interest rate making your monthly payment go up 200-400% in some cases. These loans were mostly given out to immigrants and working poor to middle class Americans they made banks a ton of money and they took advantage of those with little knowledge of how the system works they just wanted a house. You can guess how it all went down, around 2007 delinquency rates went through the roof, more and more people could not pay their mortgage, by 2008 the public started to see the corruption of Wall Street and how flawed the system was. In a span of a few months the stock market had lost half of its value, millions of people had lost their houses and jobs as a result of what would be called the Sub Prime Mortgage crisis, and back to me. Before the crisis I had $15,000 in my 401k, after 5 months it went down to $5,500. That money was gone vanished by nothing I had done. So what did the government do to the big banks to punish them? We gave many of the fallen Wall Street banks and the auto industry a 700 Billion bailout. They were called "too big to fail" the worry was the economy would completely collapse and a major depression would occur. So the banks got saved for their greed and Wall Street CEO's got their bonuses and no one went to jail. And btw it took 5 years of me saving and working hard for my retirement 401k to get that 9,500 back |