The Wall Street Crisis: I report, you decide...if it makes any sense (I'm still not sure).

I talked to Max about it on Monday, so here I go- grassy's takin a whack at Wall Street.

A bunch of banks loaned a bunch of people too much money for houses that they could not afford..

This was risky and irresponsible because those homeowners did not have incomes big enough to pay their mortgages and it was FOOLISH to think they could. 

Banks aren't getting paid back for these loans and are on the verge of going under- kaput, dunzo, bankrupt!

Adding fuel to the flame, a lot of banks made deals with other banks (or bank-type things...investment banks, perhaps? this is where my knowledge gets sketchy...) and intertwined loans/insurance/contracts (??? I don't know what I'm talking about.) with each other...so they're all interconnected. Bottom line, if one bank goes down, they're all at risk of failure.

SO, the government (the Federal Reserve) and all the bank head honchos got together to discuss how the H they're going to get out of this pickle they've so greedily gotten themselves into. It was like a meeting of Mob bosses- these guys are usually fierce competitors. My guess is it'd be very humbling having to meet up and work things out as a team. 

The government said they would NOT bail out Lehman Brothers (the bank that was doing to the worst). This could be a good thing because: a.) it means the government and economic experts did not think that Lehman's bankruptcy would create a domino effect in other banks, destroy our economy and create the Great Depression II....and b.) it forces companies to be responsible for their actions and allows competitors to move in, creating a potentially stonger, more diverse economy. BUT, it will simply take time until we can see the full effects of this decision.

Now, today, it seems the government has decided to bail some guys out. They're called the AIG, and I guess they were in pretty bad shape. Is this government intervention preventing catastrophe or dangerously interfering with the free market and not holding companies responsible for their risky transactions?

I think this is where politics may get involved. I'm not quite sure what the Democrats or the Republicans think.....

Trying to understand Wall Street is enough for now- I'll tackle politics on another day.

I have a MacBook, 

Madge