Origins of the Subprime Crisis HW
First, read over the packet and define all 35 bold words.
Then, re-read the packet and answer the following questions in two full sentences per question. Be sure to support your answers with evidence from the reading.
Part 1: Introduction
- What was causing “chaos” in the housing and stock markets in 2007? What was George W. Bush’s solution and what was the problem with his solution?
Part 2: What is Sub-Prime Lending?
- How did borrowers make money off of sub-prime lending? Why was it so easy for sub-prime lenders to take advantage of poor people?
- What did sub-prime lenders do with the loans they made? What made this scheme work?
- What are two of the consequences when there are a lot of foreclosures in a neighborhood?
Part 3: Who Benefited and Who Got Hurt?
- How did mortgage brokers make money? How did Wall street investment firms make money off of sub-prime mortgages?
- What does it mean when the author says that the “bottom (fell) out of the sub-prime market”? What did this cause?
- Were major CEO’s hurt by the crash of the sub-prime market? Who was hardest hit by this crisis and why?
- Why did so many families lose their homes during this crisis? How did predatory lenders take advantage of many people? Explain at least two ways they did this.
- Why were so many people easily victimized by unscrupulous lenders? How did some buyers try to take advantage of the subprime market?
Part 4: Where do We Go from Here?
- What kinds of companies does the author believe the government needs to distinguish between? What kinds of people does the author believe the government needs to distinguish between?
- What does the author believe were the good parts of the Mortgage Reform and Anti-Predatory Lending Act of 2007? What ended up happening to this bill?
- What is the bolder action that the author believes Congress needs to take (and has not taken)? Explain at least two of the author’s recommendation?
- What example does the author give to prove that non-profit lenders are better than for-profit lenders? Why is this a successful example?
Part 5: And it all Started with Deregulation
- Why did the banking system work between WWII and the 1970s? What did the government require during this period?
- What did community groups discover about the government and major home lenders in the 1970s? What did the government do because of this?
- How did the government de-regulate the banking industry in the 1980s? What happened in the savings and loan industry because of this?
- What do free market ideologists believe about the government? What did Federal Reserve Board member Edward Gramlich warn about because of this?
- Who created the Bush administration’s mortgage plan? Why do you think the author brings this up at the end of the article?