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The increase in home mortgages | by eric731
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The increase in home mortgages

In the picture above, we see how banks were allowed to change the way they do business.


Before, they had to accumulate money from the community to loan as a mortgage.


Now they are allowed to accumulate money from the community and loan out many mortgages off the same amount of money.


In the old system, the FDIC had to be created to protect the community from losing all their money if a borrower defaulted.


Now, the FDIC only needs to cover a portion of the depositors money because if one person defaults it only affects a portion of the money, not the whole thing.


That is why a bank allows defaulters to modify their loan. The bank knows the modified amount is only modifying the fictitious, created money, not the actual community's money. Yes, the banks lose some future money, but they did not lose actual money, since there was only a portion of the community's money that was actually invested in their house.


What do you think?



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Taken on June 17, 2011