Why am I talking about this subject in a blog focused on the human condition? Well this subject occurs because of two very human fallacies: Greed, and Human-Error. Also, today Citygroup wiped off $9.83bn US from its books, sending global stockmarkets into panic. And, it is going to get a lot worse.
You are going to need to bluff your way through this subject, so you don’t look like the person who only reads the sport pages. 
But.. if you want to read an utterly condensed version Textbook Human style:
Historically people who can’t afford to purchase a home get a loan from a bank. Banks can only afford to take on so much lending, because the had limited money. Also, banks would only lend out a certain percent of the loan, because offering 100% loans on houses was deemed far to risky. In recent years a new form of lending has emerged where Banks borrow from other large financial organisations in the Mortgage Bond Market. This type of loan is called a sub-prime loan.
Banks could take on customers who would never be able to traditionally afford a loan. It was also very profitable for banks, as they didn’t need to take on the risk, or have a large amount of ‘cash-in-the-bank’ from investors. A housing boom occurred, where the value of house increased by amazing amounts, making home-owners (or more correctly loan-owners) feel as if they were rich. This housing boom encouraged more and more people to get into the housing market, and banks became ‘loose’ with the credit-checks, and document requirements they required from customers, so they could secure more of the market. By 2005, 1 in 5 housing loans, were sub-prime loans.
The actual loan on offer was a “Balloon Loan”. This loan has fixed repayments for 2 years, then the interest rate drastically increases to the variable rate. Basically, people could not afford the repayments after 2 years years, and their repayments stopped. When this started happening on mass, banks could not repay their own loans. Also as a side note, the amount of houses now up for sale, and the lack of people able and available to purchase, caused a massive downturn in property value. Thus banks couldn’t simply sell the house and get the money back.
So these companies like Citigroup, JP Morgan Chase and The Bank of America, that used to be the furnaces of the economy, are loosing money faster than a drunk gambler. These companies originally raised money from people who purchased Housing Bonds when the market was confident. However, it is estimated that these bonds are only worth 20% – 40% of their original value. To emphasise, that is a total loss between $4.08 – $5.44 trillion dollars. That’s going to really shit on the global stock exchange when these companies expose their books.
I don’t feel so bad for only renting anymore.
