The Growing Foreclosure Crisis

One oft-repeated assertion no longer holds true. Those in trouble are not, primarily, lower-income borrowers. The foreclosure crisis has become a wave, afflicting neighborhoods of every stripe -- but particularly communities created by the boom itself.
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Some residents of California's Riverside County face uncertain futures as the area, home to many real estate agents and those in the home industry, suffers from high unemployment rates and plummeting home prices.
Risk and Regulation
May: Over objections of other financial regulators, Born issues "concept release," questioning whether unregulated derivatives contracts should get government oversight like exchange-traded futures contracts do.
November: Congress passes law to dismantle Depression-era Glass-Steagall law, which had separated commercial and investment banking. The law does not give the Securities and Exchange Commission authority to regulate investment bank holding companies, which were trading heavily in unregulated derivatives contracts.
November: A President's Working Group report on derivatives recommended no CFTC regulation, saying that it "would otherwise perpetuate legal uncertainty or impose unnecessary regulatory burdens and constraints upon the development of these markets in the United States."
June: Born leaves the CFTC, with no change in the regulation of derivatives.
December: Commodity Futures Modernization Act passes. Championed by Sen. Phil Gramm (R-Tex.), the law bars the Securities and Exchange Commission, as well as the Commodity Futures Trading Commission, from issuing new regulations on unregulated derivatives.
April: The Securities and Exchange Commission creates a voluntary program of oversight for investment bank holding companies. It gives the SEC its first comprehensive look at the large trading positions the firms had in unregulated derivatives and mortgage-related securities.
September: The Federal Reserve Bank of New York holds discussions with derivatives dealers on creating a voluntary clearinghouse for unregulated derivatives trades.
September: Insurance giant AIG is seized by the federal government after it's forced to scramble for cash to use as collateral for $440 billion in credit default swaps it sold.
September: Lehman Brothers files for bankruptcy protection after other financial firms demand cash to protect their positions.
March: Bear Stearns is rescued by J.P. Morgan Chase and a $29 billion federal government loan after other financial firms question its stability and demand cash to protect their positions with the firm.
What Went Wrong?
Part I
Risk and Regulation
How did the world's markets come to the brink of collapse? Some say regulators failed. Others claim deregulation left them handcuffed. Who's right? Both are. This is the story of how Washington never caught up to Wall Street.
Part II
Banking Regulator Played Advocate The Office of Thrift Supervision let lenders grow out of control, then fail, including IndyMac Bancorp, Washington Mutual and Downey Savings and Loan.
Part III
The Frenzy When the housing market began to tank in 2005, Wall Street ran through the yellow light of caution and created even riskier investments -- and Washington had no mechanism for finding out what was going on.
Part IV
Investigating AIG: The Beautiful Machine Greed on Wall Street and blindness in Washington certainly helped cause the financial system's crash. But a deeper explanation begins 20 years ago with a bold experiment to master the variable that has defeated so many visionaries: Risk.
Explaining the Crisis
Creating the Wave Low interest rates and easy credit allowed many Americans to live beyond their means.
Wall Street
Riding the Crest Wall Street devised exotic securities to earn fees from the debt boom.
Housing Values Overburdened by debt, a relatively small percentage of homeowners began missing mortgage payments, creating a domino effect that sent losses throughout financial markets.
Collateralised Debt Obligations
Mortgage Mess A step-by-step explanation of how mortgages became the basis for a precarious investment structure that contributed to the current financial meltdown.

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