Subprime: Let the finger-pointing begin!

The crisis brought on by worries about shaky subprime mortgages continues to rattle Wall Street. Even as the storm rages, the blame game has begun.

The borrowers
The borrowers
Let's start at the very end of the credit chain and work up. That means we begin with the borrowers themselves - in other words, with us. Thanks to low interest rates in the wake of the stock market crash, getting rich in real estate, always part of the culture, became a national pastime, with cable-TV shows like Flip This House, Flip That House and The Property Ladder (not to mention newspapers and magazines) stoking everyone's inner Donald Trump. Admit it - how often did you go on the Web to check the prices of homes in your neighborhood, just to see how much you could get for yours?

As prices kept soaring, the urge to get in on the boom became overpowering. Medical students, hairdressers and other amateurs were snapping up multiple condos in hot spots like Miami and Las Vegas, planning to flip them for quick gains. And people for whom home ownership once seemed out of reach took on far more debt than they could ever hope to repay. Don't have enough cash to put down the customary 20 percent? Just put down 10 percent. Better yet, borrow the down payment! If the bank approves, it must be okay, right?

Feckless, naive and pathetically addicted to easy money - sure. But with teaser rates and complicated terms, hopeful homebuyers often had little sense of what they were getting into. Now many will pay dearly for their poor judgment - losing their houses, having their credit ruined. We weigh our belief in individual responsibility against the all-too-human failing of getting caught up in a national frenzy.
The borrowers Mortgage brokers Appraisers Mortgage lenders Wall Street Rating agencies The Federal Reserve
Danger: Steep drop ahead  Even if the credit crunch passes without a major catastrophe, the prices of stocks, bonds and real estate have a long way to fall. (more)
Subprime on the Rhine Fortune's Peter Gumbel investigates how Germany's IKB Bank became the biggest international victim of America's subprime-mortgage crisis. (more)
Mortgage mayhem Home-loan default rates across the U.S. have nearly tripled since 2006, especially for subprime loans. And with $850 billion in adjustable-rate loans scheduled to reset by 2008, defaults are likely to rise even higher. (more)
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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.