Giant banks that received billions of dollars of taxpayer bailout funds financially backed the subprime lenders that brought down the economy and triggered the economic crisis that now grips America and the world.
Instead of being victims of a financial collapse, the banks actually created their own problems by promoting the risky mortgage market that plunged the nation into recession.
Reports The Center for Public Integrity:
The top subprime lenders whose loans are largely blamed for triggering the global economic meltdown were owned or backed by giant banks now collecting billions of dollars in bailout money — including several that have paid huge fines to settle predatory lending charges. The banks that funded the subprime industry were not victims of an unforeseen financial collapse, as they have sometimes portrayed themselves, but enablers that bankrolled the type of lending threatening the financial system.
These are among the findings that emerged from the Center for Public Integrity’s analysis of government data on nearly 7.2 million “high-interest” or subprime loans made from 2005 through 2007, a period that marks the peak and collapse of the subprime boom. The computer-assisted analysis also revealed The Subprime 25 — the top 25 originators of the high-interest loans, accounting for nearly $1 trillion and about 72 percent of industry-reported subprime loans during that period.
U.S. and European banks poured huge sums into the subprime lending market due to unceasing demand for high-yield, high-risk bonds backed by home mortgages. The banks — including household names like Lehman Brothers, Merrill Lynch, Citigroup, Credit Suisse First Boston, and Goldman Sachs & Co — made huge profits while their executives collected handsome bonuses until the bottom fell out of the real estate market.
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