The American way of people living beyond their means
Credit Crunch, Bailout News, California Housing Crash, The Economy, Real Estate June 9th, 2009
More signs of this bubble economy that is bursting. We have built our prosperity on credit and we are now paying the price. According to this article in the LA Times:
To get cash for business expenses, one-third of California small-business owners took out exotic, high-risk products, such as those that required little proof of income or allowed borrowers to pay so little that their loan balances rose, said accounting Professor Samuel D. Bornstein of Kean University of Union, N.J.
Bornstein, who has studied the issue extensively, predicts the business owners, many now far underwater on their loans, could shed 2.1 million jobs in the state over the next four years, creating even more problems than the initial wave of subprime mortgages.
The idea of using a house to finance a business caught on in the ethnic communities, said Sokhom, 60% of whose clients are immigrants from Asia or Latin America.
“People were saying that if you don’t do it you are crazy, you don’t know what’s going on,” he said. “And they said if you can’t pay when the loan resets, you just refinance again.”
