Foreclosure Relation To 9/11 And Sub-Prime Crisis

February 8th, 2008 | Tags: Foreclosure

Post 9/11 scenario US smacks of terrorist paranoia. It is difficult to get into an ordinary office in New York without passing through innumerable security turnstiles and unfolding details about who is to visit whom, license no and you name it. It all looks like a movie scene! Things are impossible at United Nation, Federal Reserve and the ivory towers of Walls Street. A needle cannot get through for decades.

This brings into question that is the 9/11 incident the cause for this foreclosure crisis? Is the sub-prime issue related to speculative deals nothing more than tools for far more deep rooted causes? That one single incident in November has cost the nation trillions. Since the World War II no threat has been larger or more ominous. Radical Islamic fundamentalists pulled down the World Trade Center but federal rate cuts falling from 6% during the boom years of the Internet was already down to 3.65% in the autumn of 2001. The decline in the stock market was brutal and had already set in. Within weeks of 9/11 it dropped to 1.75%. It was a hard struggle to keep the economy on its rails.

Federal funds rate continued to slide hitting an all time low of 0.98% in the last month of 2003 – that is 2 years after the high drama. It stayed around 1% to trigger off a boom in low cost mortgages known as the sub-prime. It was a bonanza for ordinary folks whose ordinary pay cheques could fetch extraordinary houses. While on the other hand cash deposits earned virtually nothing. Index levels showed that almost anyone with a beating pulse could own a house in USA. Borrowed money was to all practical purposes free. It was not surprising that the real estate market ballooned – rising by 46.9% in 5 years coming to a halt on 30^th September 2007. It calculated to an annual rise in value of 8%. Simultaneously during this same time the CPI rose at only 2.9% annually. The result was foreclosures.

The blaming game goes on. The Federal Reserve can be charged for keeping interest rate too low for too long. Wall Street and its troops of mortgage lenders and agents can be blamed. Borrowers can be blamed for being gullible and greedy. Whatever the cause for foreclosures– there is nothing to be proud about. It was all driven by voracity.