Global Credit Crunch
While not yet a certainly the prospects for a global credit crunch from the wreckage of two Bear Stearns hedge funds and the rising sea of loans gone bad in the sub prime housing leading market makes the possibility all too real.
Under Allan Greenspan interest rates were set at artificially low rates for a long period of time. The widespread availability of easy credit at low rates caused lenders to lend money to millions of folks who are not having difficulties in paying it back.
The following video has an interesting discussion about the “toxic loans” held by hedge funds and how the practice of using loans purchased from banks and then borrowing money from the banks using the loans as collateral is causing problems for not only the hedge funds but for the banks.
I predict that long before this just beginning period of correcting the excesses in the availability of easy credit over the past few years is over one Alan Greenspan will go from being considered a credit maestro to being labeled a complete idiot.
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