For José R. Uzal
In 2007 the Federal Reservation began to lower the money-market rates and the government established a politics to convert us to all into housing owners. They were eliminated or ignored the regulations that were current to grant mortgages. This stimulated the housings demand. The builders were not giving supply, the brokers of mortgages and of real property were doing fortunes overnight. The banks and the stockbrokers were receiving big commissions. The only problem was that every increase in the price of the property was reducing the number of persons who were qualifying for a mortgage. The participants in this banquet answered offering mortgages with money-market rate to 1 per cent, without having to demonstrate the aptitude to be able to pay and with an irrational increase in the monthly quota in three or five years.
The buyers took the risk of accepting a mortgage that they might not pay thinking that the value of the property would keep on rising. The financial markets for his part, had an insatiable mortgages appetite and only it was interesting to them to create new mortgages without looking at the future.
Wall Street had discovered that, without bank regulations, could divide the mortgages, sell the fractions and charge for an insurance policy against the mortgage execution. In fact it neither was an insurance policy nor was described as such to avoid the scrutiny of the regulators of the insurance industry. The instrument was a promise to change a fraction of the mortgage into other one in case of bank execution.
After this market was established only it was staying to create the biggest quantity of possible mortgages to be divided. The banks and the big financial companies in the entire world bought the fractions of the mortgages and the insurance policies that were accompanying them. The agencies that verify credits and analyze the quality of the financial instruments of investment thought that the mortgages fractions were an excellent investment.
Trillions of dollars sold in fractions of mortgages and insurance policies (credit default swaps). Up to today nobody knows adónde it went to stop the money of these sales. Worse, nobody wants to speak about that because all these obligations that sold are hanging and they have not been considered publicly in the programs of bank rescue.
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The owners who had seen his houses rising of value greatly made use that the banks were facilitating credit lines to them against the appreciation of the property to buy a car, to pay debts or simply a few memorable holidays took.
In spite of all the efforts to create new mortgages the number of buyers began to reduce, the increases in the mortgage payments came into force causing that the monthly payments will increase to the double or the triple and the works began to skimp.
The investors across the world saw eliminating his seemingly sure investments in real property in the United States. The banks that were administering the sale of the mortgage fractions did not have any more revenue sources. The brokers of mortgages and of real property saw the end of the banquet. The proprietors of properties of houses began to face mortgage executions. The properties began to lose value helter-skelter. The biggest financial crisis of the history had begun.
Today we are still in the beginning of the crisis. The value of the properties has not touched fund. The number of bank executions will double in 2009 and the unemployment will never increase to numbers earlier seen. The nation is indebted 800 times the gross product and we keep on spending as if there was no problem.
It would be formidable if someone will ask adónde it went to stop the money of the sales, to how much in fact we are indebted and who must be prosecuted by this disaster. The answers to these questions would give us a solid base to begin to solve the present situation. We cannot solve the problem if we do not know who and what caused it and adónde it went to stop the money.
(uzal@msn.com)
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