This is from the “random thoughts before I fall asleep department.”
As a society, will we ever learn? Two unrelated issues, similar timeframes. First, in the early 80’s we enjoyed the Savings and Loan Crisis. The origins and result of that crisis are beyond my ability to analyze on my blog, it’s easy enough to Google to read up on the history, but it’s safe to say that it wasn’t so long ago that we don’t remember that there were some painful times back then. It’s safe to say that one component of that crisis was rising interest rates, and the fact that banks were paying more on CDs than on the interest on their outstanding loans.
Today, we have the flip side of this. Rates dropping so low that the teaser rate on an ARM was 1-2% and had nowhere to go but up. And that ‘up’ somehow caught everyone by surprise. There’s enough blame to go around, aggressive mortgage salesfolk, an industry that wasn’t abiding by the rules all the time, ratings companies that misrated the resulting mortgage packages, and consumers who were, well, let’s just say they didn’t quite understand what they were buying. That’s enough for one day’s (or night in my case) thought. Tomorrow, history repeats, again. Groundhog Day, or 50 First Dates, depending on your age.