The Crisis of Credit Visualized
The Crisis of Credit Visualized video is probably one of the best explanations of the mortgage crisis that I’ve seen yet. Jonathan Jarvis does a great job of using multimedia and the web to send a message. Albeit a rather simple explanation, it does shed light on the one thing I’ve been saying all along: that the problem was caused largely by banks, not by home owners. Granted, there are some home owners that were grossly irresponsible and signed on a mortgage that they damn well knew they couldn’t afford. However, it was the banks that created the conditions that allowed for this kind of abuse. So, yes, we should be hypercritical about what decisions banks make.
Imagine that you’re living off a slot machine that continually gives you a nice profit for every dollar you stick in it. Sooner or later, that slot machine is gonna stop paying off, right? Sure enough, weeks later, the slot machine stops paying off as much and yet you continue to drop money into it thinking that it’ll start paying off again. Eventually, the slot machine is completely empty and doesn’t pay you anything even though you just got three gold bars.
That to me is how I view the way banks treated mortgages. They made the decision to play slots with high risk mortgages and continually allowed more and more high risk mortgages to be added to their portfolios. In the end, the bottom fell out and the mortgages stopped paying off. Just like a slot machine, eventually any high risk investment will stop paying off if you continue buying into it.
So who’s really to blame? The home buyer who just wanted the opportunity to own a home? Or the bank who got overzealous with the prospect of making more money on risky mortgages? You decide.
With that in mind, here’s the full video of The Crisis of Credit Visualized:
