"When mortgage default rates started to climb earlier this year, many experts thought the damage would be confined to the minority of issuers that had binged on subprime lending.
It's turning out much worse. Consumer spending is off, the credit crunch is spreading, the housing market is in a slump and the stock market has been shaken.
The economy is so threatened that the Federal Reserve set aside its worries about inflation and on September 18 cut short-term interest rates by half a percentage point for the first time in four years, hoping a shot of stimulus would head off a recession. The Fed pointed to worries about "tightening of credit conditions" that could deepen the drop in housing prices and the recent pullback in homebuilding." Source: Knowledge@Wharton
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Related: The Housing Finance Revolution
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