Unpredictable Markets
As I picked up the Washington Post Saturday morning, my mind quickly retreated to the days after 9/11. Yet, there were no pictures of burning towers or panicking New Yorkers running through the streets of Manhattan. Nor was President Bush drumming up support for retaliatory attacks against Afghanistan.
No it was the pictures of horrified traders at the New York Stock Exchange as they watched Dow plummet and the global liquidity crisis ensue. As the New York Times reported this morning, it was the depreciating housing market in the United States which triggered the crisis:
“A steep sell-off in global markets on Thursday and Friday was triggered by distress signals from France's biggest bank, BNP Paribas, which had to freeze billions of dollars in assets in three mutual funds because of the falling value of securities linked to high-risk mortgages taken out by U.S. borrowers.” AP, 8/13/07.
By late Friday anxious traders and investors breathed a sigh of relief as central banks around the world dumped the largest amount of capital into the market since the days after 9/11. To those unfortunate Americans who have recently purchased a pricey home, this crisis may last more than a few days.
Most will likely consider this recent crisis on Wall Street as the fate of the market and the consequences of globalization. This view has been supported by the major financial players, including Federal Reserve chairman Ben Bernanke.
In short, most will publicly de-politicize this shakeup on Wall Street. Yet, privately many would admit that it is intimately linked to politics. The problem stems from predatory banks making risky loans at high interest rates to those that can’t pay back their loans. Since the passage of the ‘Bankruptcy Reform Bill,’ the homeowner has found it increasingly difficult to declare bankruptcy if they default on a home mortgage too expensive for their salary.
It is clear Congress needs to crack down on these predatory lenders, and do everything possible to ensure those hit by the fluctuations of the market aren’t forced into foreclosure. As recently shown, fickle U.S. markets affect the stability of markets worldwide.
No it was the pictures of horrified traders at the New York Stock Exchange as they watched Dow plummet and the global liquidity crisis ensue. As the New York Times reported this morning, it was the depreciating housing market in the United States which triggered the crisis:
“A steep sell-off in global markets on Thursday and Friday was triggered by distress signals from France's biggest bank, BNP Paribas, which had to freeze billions of dollars in assets in three mutual funds because of the falling value of securities linked to high-risk mortgages taken out by U.S. borrowers.” AP, 8/13/07.
By late Friday anxious traders and investors breathed a sigh of relief as central banks around the world dumped the largest amount of capital into the market since the days after 9/11. To those unfortunate Americans who have recently purchased a pricey home, this crisis may last more than a few days.
Most will likely consider this recent crisis on Wall Street as the fate of the market and the consequences of globalization. This view has been supported by the major financial players, including Federal Reserve chairman Ben Bernanke.
In short, most will publicly de-politicize this shakeup on Wall Street. Yet, privately many would admit that it is intimately linked to politics. The problem stems from predatory banks making risky loans at high interest rates to those that can’t pay back their loans. Since the passage of the ‘Bankruptcy Reform Bill,’ the homeowner has found it increasingly difficult to declare bankruptcy if they default on a home mortgage too expensive for their salary.
It is clear Congress needs to crack down on these predatory lenders, and do everything possible to ensure those hit by the fluctuations of the market aren’t forced into foreclosure. As recently shown, fickle U.S. markets affect the stability of markets worldwide.
posted by Trevor at
9:29 AM
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