The loans went to borrowers who might never before have been allowed to borrow. When they found repayment difficult, they were permitted to refinance their loans, generating fees for the lenders and postponing the ultimate reckoning. Then the credit markets turned and both the borrowers and lenders were in deep trouble.
So it went with the subprime mortgage crisis. And so it is now going with corporate loans and bonds. It appears that defaults on leveraged loans and corporate bonds will soon rise to levels not seen since the Great Depression.
It has come to my attention that some people don't think we are in a crisis - certainly not one worth panicking over.
I think some panic is appropriate at this juncture.
If that does happen, a wave of corporate bankruptcies will deal another blow to the American economy, and present the Obama administration with more painful decisions about possible bailouts — bailouts that could be made directly or indirectly by persuading bailed-out banks to make loans that might not seem wise to the bankers.
More bad loans! Brilliant!
[Update 2015 05 25 - Things were rough in 2008 and 2009. I think the financial system is more unstable now and yet life goes on, so maybe you don't need to panic, but to quote David Carvey imitating the first George Bush, ignoring the instability "wouldn't be prudent at this juncture."]
Read Nano-Plasm - you know you want to.
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