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The Timeline

If you create a timeline of the real estate crash it starts between the end of the Dotcom gold rush and just after 9/11, where low interest rates fueled the housing market’s growth and rise. Then, the big game began, where the innovators and the savvy investors made money as real estate prices rose and they sold their properties after a year or two. Later, the ignorant begin to make bets and get into the real estate game but didn’t get out until it was too late.

Finally, it may sound a bit harsh, but the idiots walked into the trap and were burned right away as property they bought almost dropped in value immediately after the homes or condos were purchased and closed. Of course, somewhere in there you had the crooks and the criminals who preyed upon the naïve.

Last but not least, you add in the greedy risk takers who were part of the mortgage backed securities game plan—where companies sold credit default swaps that were used to hedge these bets, but with no capital reserve to back these insurance bets—and the financial collapse picked up speed. Throw into this small fire the absence of any regulation and you’ve got a forest fire that’s hard to contain, let alone stop.

Once Lehman Brothers collapsed, a big part of the chain broke. Those who had money with Lehman could no longer access their money. Lending dried up and the system froze. Moody and the S&P, two of the main rating agencies, were also downgrading the credit standing of companies only furthering the crash and finally the collapse. It was a time where these rating downgrades should have been halted.

Looking back, there was a belief that Americans had more money than they did, when it was all borrowed money and investments were highly leveraged. People made more bets as they lost more money when they thought things would improve, but they only got worse and many lost a fortune.

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