Mortgage Crisis Hits Depression-Era Lows

February 27, 2008 09:00 AM
by findingDulcinea Staff
The sub-prime crisis has put 8.8 million homeowners in over their head. Americans haven’t been in this kind of debt since the Depression.

30-Second Summary

The mortgage crisis is being compared to the worst economic meltdown in American history.

The New York Times reports that “not since the Depression have a larger share of Americans owed more on their homes than they are worth.”

With 8.8 million homeowners in trouble, the Bush administration and Congress are considering government-funded emergency measures, such as a federal mortgage guarantee for troubled borrowers.

CBS News explores a handful of proposals that could be discussed on Capitol Hill this week. They include a plan from Sen. Christopher Dodd, D-Conn., that would create a $20 billion federal corporation to buy mortgages back from struggling homeowners and refinance the loans.

Slate opinion writer Nicholas Bagley explores the complex reasons why the government took so long to intervene, and wonders whether mortgage salvation would be better off in the hands of the state.

He discusses how several states, beginning with Georgia in 2002,  acted to curb “predatory” lending, taking action well before the Fed stepped in.

“Some of the biggest players in the secondary mortgage market are national banks, and the states' efforts to curb predatory lending clashed with the banks' fervent desire to keep the market in sub-prime loans rolling,” Bagley writes.

So with the depths of the sub-prime crisis so profound, Time magazine asks, "What's the worst that can happen?"

Unfortunately, according to Merrill Lynch economist Kathy Bostjancic, the mortgage crisis could soon "expand into prime mortgages, home equity loans and credit cards, making it the worst consumer recession since 1980.”

Headline Link: Mortgage crisis leads to Depression-era lows

Mortgage crisis could soon spill over

Opinions & Analysis: Feds versus state governments

Related Topics: The politics of the mortgage crisis

Background links: The sub-prime crisis affects everyone


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