Someone please explain?

Question

this might sound stupid but all i am hearing on the news it about this credit-crunch

would someone please explain it to me

thank you

Answer 1

In "simple" terms....the banks/credit card companies have been loaning money to people who are now having a difficult time paying them back.  The result is lots of foreclosures and defaults on loans.

In "my" terms....it's just deserts.

I just read where Citibank had over $2 BILLION in losses in the 2nd quarter of this year.  Gosh, that sounds terrible.

But in this same period last year they had $6 BILLION in profits!  Did you see any benefits to this?  Of course not!  Your rates went up...your services fees went up....and they pocketed it like crooks.

And now they are crying because they are losing billions now?  I don't care to hear it.

Answer 2

Well basically it's a shambles. Thanks to the layed back, predator and anti-qualification lenders in the US....it's like Sep 11 all over again but from a financial perspective.

The once strong mortgage backed securities are now or nearly worthless to the millions of individual/commercial investors because the mortgages were held by persons who were incappable of servicing them.

The sub-prime applicants, those with poor credit scores/histories were able to secure large mortgages for >$300,000 and they were often enticed by no or low teaser rates. Where the monthly payment was very low and affordable but once that expired in 1-3 years the monthly payment became huge and they couldn't afford it anymore.

Same for car loans and personal loans.

So this caused loss of money all around. You need money to pay your employees....so that's job loss and company close down everywhere.

Even though interest rates are the lowest they've been for many years homeowners still can't afford it. They're just packing up, declaring bankruptcy and renting or shacking up with someone.

Answer 3

Everythings getting expensive thanks to banks lending to people who can't repay, and the insider dealing of oil shares; black gold..

Answer 4

What you might've heard is that many of the financial institutions have problems because of the many subprime loans. Subprime loans are loans made to home purchasers who aren't really qualified because they don't earn enough, have bad credit, had a very low down payment or any combination of these. In addition, there may loans made for refinancing of existing homes. The greatest majority of these loans were made for very low initial interest rates (for the first

three years or so) but then the rates jumped drastically because those were adjustable interest rates. Many people couldn't pay therefore defaulted on their loans and the financial institutions had a lot of unpaid loans on their hands. They had to write off these loans and thus the huge losses reported.

Answer 5

There is also a good article below with top credit crunch facts.

http://ezinearticles.com/?Credit-Crunch-...