Bailout Case
Essay Preview: Bailout Case
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The financial crisis that occurred in late 2008 had started and been led up to from several previous years of loans and debt that kept getting piled up through different administration and sub loans. The Clinton administration had implemented a program that worked to allow poor the ability to buy homes with no down payment and bad credit. Obamas organization also aided by providing borrowers and pressuring banks to make the loan for the poorer.
The loans were offered at low interest rates, as low as 2.5%, and then Fannie Mae & Freddie Mac were demanded that they bought more of these risky loans to help the poor. Since the FM&FM mortgage purchases are backed by the government, those loans were then resold to invesetment banks. Those investment banks then bundled them, creating a hefty fee, then turned around and sold the loans all over the world.
Unfortunately this created a very large problem, because these loans were note accuartly total or tracked due to the process of buying and selling, and much rather than keeping them on the accounts until paid in full they were never added into the accounts. Creating an over abundance of debts.
Having to loan banks millions of dollars to recover from the over abundance of debt, resulting in the bailout. In which us as taxpayer will be paying for, for several years to come.