This week marks the 10th anniversary of one of the most dramatic series of events in human history, when raw, unmitigated greed was allowed to leverage itself, virtually unchecked, to a disastrous end. I’m talking about the Financial Crisis of 2008.
On January 6, nine months before the collapse, part of my 2008 Predictions included this: “There will not be a national crisis of mortgage foreclosures.”
As noted above, there was a financial crisis that year. A devastating one. But my prediction was correct, because unlike what you may have heard, that crisis was not caused by mortgage foreclosures, sub-prime or otherwise.
The Financial Crisis of 2008 was caused by how Wall Street banks packaged and sold bundles of home mortgages – called tranches – as securities. Creating these securities wasn’t the problem. Mortgage-backed securities have long been an essential funding source of the home-ownership pillar of the American dream. This crisis was caused by that unmitigated greed.