The current meltdown is just a bigger version of the dot-com bust of the 1990s, with the usual lessons about financial bubbles. But this crisis is harder to swallow, because it starts with people who were just trying to buy a house, who usually had no understanding of predatory lending or derivatives schemes. It was a mystery how the banks did it, but you trusted that they knew what they were doing. Your bank resold the mortgage to an aggregator who bunched it up with thousands of other subprime mortgages, chopped the package into small pieces, and sold them as corporate bonds to parties looking for extra yield. Your mortgage payments paid for the interest on the bonds.
The global financial crisis makes it even more urgent that the United States not only take care of its own economy but also redouble efforts to aid the world’s poorest, according to a new report and several development experts.