Thursday, May 7, 2009

California Lenders Caused Global Meltdown

By Robert Gammon
Thu, May 7, 2009 at 11:48 AM

A new report shows that California lenders made 56 percent of all subprime loans nationwide, during the height of the housing boom from 2005 to 2007, according to the Chron. The report was conducted by the Center for Public Integrity, which analyzed $1.38 trillion of subprime mortgages. Reading between the lines, that means banks and other lenders in California were more responsible than businesses in any other region of the world for the foreclosure crisis and the current worldwide economic meltdown.

It also means that California lenders primarily caused the ridiculous housing bubble in the Golden State, where tiny homes in borderline neighborhoods regularly sold for more than $500,000 a piece. Those lenders gave loans to people who simply couldn't afford to pay them back, and then the army of financially unqualified buyers bid up home prices way above their true market values.

And finally, when those folks defaulted on their bad loans, banks and lenders went insolvent and forced the biggest government bailout in history to avoid another Great Depression. Among the worst offenders, according to the report, was San Francisco-based Wells Fargo Bank, which issued $51.8 billion of subprime mortgages before the crash, ranking it eighth on the report's list. First on the list was Countrywide Financial.

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