U.S. mortgage meltdown linked to 2005 bankruptcy law

"There’s no shortage of blame for the mortgage crisis that drove the economy into the ditch.

But here’s a fresh culprit: the 2005 bankruptcy reform act, which was strongly pushed by the credit card industry.

So say three researchers at the Federal Reserve Bank of New York, who argue that the legislation shifted risk from credit card lenders to mortgage lenders, helping trigger the surge in home foreclosures."

http://www.kansascity.com/105/story/976039.html

 

Pure nonsense.

The direct cause of the financial crisis has been known & written about for almost a year. Whoever is still trying to find other reasons is a retard, plain & simple.

 

it's not nonsense.

bankruptcy laws like chapter 11 were enacted after the great depression. chapter 11 and chapter 7 are good laws cause it prevents unnecessary economic destruction from failure of management or temporary economic recessions.

The theory is that a person or corporation is better off in paying a manageable interest payments rather than just walk away and shut the down business.

also, since banks could enslave borrowers for life for money owing, banks had reduce their risk of non-payment. so banks made more risky loans since borrow cannot NEVER default on loan.

since the banks lent money they didn't have or banks can write off bad loans off profit. however if corporations go bankrupt, jobs would be lost and if person is stuck with interest payments or debt that can never be paid off cause it's unmanageable from excess interest payments such as credit cards that are like 20% even 10% is excess interest rates.

banking is a profession and lending money is a profession. risk of lending money is default on loan and collateral must be collected.

the lender gets paid on interest for taking the risk of lending the money.

the cause is the banks took to many risk and lending recklessly as more money you lend the more money you make.

 

the banks found out that they had too many loans that didn't have collateral.

 

Oversimplified but the basic premise is correct.

Phantom L3 assets is more like it.

The bankruptcy law had absolutely nothing with easier mortgage lending. The bankruptcy law is more concerned with unsecured debt (such as CCs)and was lobbied for by the credit card companies not the mortgage lenders.

 

i think the "tougher" bankruptcy laws forced consumers to pay off unsecured debt rather than walking away and being able to concentrate soley on their mortgage. perhaps a homeowner riddled with debt would always opt to pay the mortgage before a credit card compant;thats what kept their ability to keep paying their mortgage. force them to pay credit card debt as well and the mortgage is now in danger.
my 2 cents