Banks Knew About Real Estate Loan Crisis Beforehand
American banks knew ahead of time that real estate loans with high risk – known as sub-prime loans – would degenerate into a crisis says Yuliya Demyanyk, an economist at the Federal Reserve.
What was surprising for banks was the trigger time and the scale of crisis, says Demyanyk. “Most likely, the crisis was not surprising, but its magnitude and time were,” the economist insists.
Since the start of the crisis, several studies have shown that banks were aware at one time that the situation would get rid of control. Two months ago, The Center of Public Integrity published a report which showed that “Mega-banks that have financed the sub-prime industry were not victims of the financial system collapse, as they say. “
These banks were deliberately facilitating financing home loans which now threaten the financial system, the report shows.