I found this Visual Guide to the Financial Crisis on mint.edu which I think is absolutely essential reading for anyone who is still bewildered over what’s happening. If you don’t have the time or can’t muster the attention to read lengthy analysis pieces and papers on the events leading up to where we are now, this makes for a decent, easy to understand, summary.
😉 something like that. 😉
I probably should have mentioned one other fact: most mortgages in the US work differently that they do in Malaysia, or indeed most of the world. In Malaysia, a home loan is just an ordinary loan, with the house used as collateral. The borrower owes the bank a fixed amount of money, and the debt stays with him or her wherever he goes until it’s paid off. If the borrower sells the house for less money than the value of the mortgage, then the borrower needs to repay the bank the balance out of his or her own pocket.
In the U.S., the mortgage stays with the house. If a borrower walks away from the house and gives it back to the bank, then the borrower owes nothing to the bank. This means that borrowers have a strong incentive to walk away from their houses if the commercial value of the property falls below the mortgage value, which explains why the banks have been hit so hard.