There are so many things going on in the world of finance right now.  I know that you are hearing about things like:

• Mark to Market
• Credit Market Freeze
• Derivatives
• Sub-Prime Mortgage Meltdown
• Mortgage Backed Securities (MBS)

And there are a hundred more… 

I can’t explain each of these in depth, but they are some of the things that NEED to be understood in order to know how we got to this point where the banks aren’t willing to loan money to each other even overnight.

The path that we took to get here, in part, goes back to an item called the Community Reinvestment Act.  Groups used it to force banks to make loans that were VERY shaky.  It has its beginings in the Carter Administration.  It really built steam in the Clinton years.  It kind of faded into the background in the early years of Bush… but the market was flush, so the problem was just a festering wound over unbroken skin until home values started to get challenged.

I have written a lot on my other blog about how the CRA and groups like ACORN played a large part in the financial problems we are currently facing… but I’m trying to not be political here (yes, I AM opinionated).

This is the part that you need to know.  This has been a long time coming.  And now, because there are so many bad loans, and banks don’t know which other banks might have junk on their books, they don’t trust each other.

What needs to happen in order to move forward is that trust in the financial system needs to be restored.  That is the goal of the bailout.