Mortgage Meltdown And Having To File Bankruptcy
As is the case with mortgages and car loans, virtually all consumer credit is securitized. This means that your MasterCard and Visa, your store department cards, furniture loans, computer loans–all the lenders loan you the money, and then bundle up the right to receive payment, sell it to a trust, and get more cash to loan out yet again. Since credit card companies are borrowing money at less than 1% and loaning it to you at 8%…or 18%…or 28%…that’s a lot of cash, and huge profits.
But what happens when people can’t pay their credit cards because of a meltdown in the economy? The same thing that happens when people can’t pay their mortgages: a crisis. How will we deal with this crisis? Many of the credit card companies have already formed National Banks, which allow them to receive TARP money. People began losing their homes to foreclosure and and even file bankruptcy in ever growing numbers as part of the mortgage meltdown in late 2007, and it accelerated through 2008. When did the crisis happen? Not until the major Wall Street players started feeling the impact. This explains why none of the TARP money thus far allocated has gone to help regular folks save their homes.