Bear Stearns in Danger of Collapse… Dow Falls 400 in One Day… Big Three Automakers Seek Emergency Aid… Citigroup Shares Tumble Below $5 a Share… Dow drops below $8,000… Federal Regulators Shut Down Two California Thrifts… More Consumers Switch To Buying With Cash…
For more than a year, we’ve been hearing daily updates on the deepening economic morass, first starting with the subprime mortgage crisis, then spreading to the banking industry, then to the economy in general. Today, more and more people are cutting back on expenses, shopping less, and are fearful of losing their savings and their jobs.
The Beginning of the Crisis
According to Peter Gomori, professor of finance at St. Francis College in Brooklyn, most people in the know trace the beginning of the crisis to the summer of 2007, when there was what he calls a “dramatic stall” in the Dow Jones Average.
“I think that the Bear Stearns collapse caught many of us by surprise,” Gomori says. “The securities related to the real estate industry began not to perform sometime in 2007, when interest rates had risen and they had to adjust some of these adjustable types of mortgages. After [that], you began to see patterns of non-payment.”
Mona Shyman, vice president of the Federation of New York Housing Cooperatives and Condominiums (FNYHC), says the first sign she saw was in February 2008, “When people with good credit ratings who were going for mortgages were being asked more difficult questions.