The Giant Pool of Money

The Giant Pool of Money

The giant pool of money is an eye-opening show that looks into the causes of the economic crunch. Listening to the radio show, one gets to realize that the mortgage crisis was a gradual process. There were tell-tale signs that the financial environment was too good. For instance, the world managed to get 36 trillion in 6mothns (Chicago public media, 2012). This meant that there was a lot of money that was coming into the government systems. As much as there was a global pool of money, the parties involved did not want to engage in an individual mortgage.

Loans were Lend to people who previously did not quality to receive them. Financial institutions played a vital role in causing the economic crunch. Mortgage providers did not scrutinize potential home owners to determine whether they had the potential to pay mortgages. Banks gave individuals, large amounts of loans that they could not manage to pay (Chicago public media, 2012). The leniency in giving loans extended to banks giving loans to individuals that died years back. This is because there was no form of verification needed. Financial institutions would then sell the mortgages to Wall Street which would then sell them to the global pool of money. The discussion also points onto the drastic rise of housing prices.  The mortgage industry, blinded by the high prices failed to see that business was too good.

Overall, the questionable lending practices in the US led to the mortgage meltdown market. The meltdown also paralyzed the world financial system. Institutions such as the credit-rating agencies contributed to failure of the housing industry. The credit ratings acknowledged the attractive securities which gave the impression that they were safe. Potential home owners thus blindly purchased homes expecting the prices to remain high.

Reference

Chicago public media, (2012). http://www.thisamericanlife.org/radio-archives/episode/390/return-to-the-giant-pool-of-money

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