|Home repossessions have become routine in many parts of the US
As the US treasury struggles to force its economic rescue package through congress People & Power looks back to see how we got here.
This year, millions of homes in the US will be repossessed. Wall Street was aware of the risks involved with sub-prime lending but chose to ignore them. No ethics, just money. Here is a story of greed and recklessness.
In California, the sub-prime crisis has hit homeowners full on. Repossessions have become routine and the foreclosure rate is still accelerating. Neat façades and tidy gardens cannot prevent houses being sold for almost half of what they cost a year ago.
Pressed for time and money, owners are torn out of their homes. "It's like leaving your children," says one homeowner, hoping that the bank will accept a quick sale and forgive the loss, but this is unlikely. Most are made to wait until they default on repayment, which wrecks their credit record.
Former bankers reveal how low interest rates were meant to boost the economy. Banks looked for ways to make a profit despite low rates and chased high-risk mortgages that would pay 8 or 9 per cent, ignoring the consequences for borrowers if prices fell and interest rates rose again. Now that the system has failed, banks are less ready to lend money. This impacts the entire economy - families lose their homes, businesses fail.
Wall Street gambled and the world pays $700bn dollars? Samah El-Shahat interviews former economist, financial commentator and author James S Henry.
This episode of People & Power airs from Tuesday, October 07, 2008 at the following times GMT:
Tuesday: 0130, 1230 and 1930
Wednesday: 0330, 1030 and 2230
Source: Al Jazeera