What am I missing?

[BigV]

Originally Posted by aimeecc

What I don't get is that banks are loosing money and the stock markets freaking out because people are foreclosing because they can't afford the mortgage in which the interest was jacked up on them... by the bank. I'm no ecomoics guru, but it would seem to make sense to me that the banks should lower the interest rate to a manageable level. They'll still make money, and not have foreclosures. Since no one is doing this, there must be something wrong with my simple way of thinking.

One of the guys at work was in one of those adjustable rate mortgages. And he makes a good income - in excess of 100k/year. His home sounded like a typical middle class home - he wasn't in a mansion with a middle class salary. But he was stressing out about needing to get it refinanced because if he didn't he wouldn't be able to make the payments under the new interest rate. He got it refinanced and had no issues... but it looks like a lot of people aren't as lucky.

Please see the fable about the goose that laid the golden egg.