Banking Crisis In America

Today the banks in America are suffering a great deal, and it is effecting many people and the economy. It is hard to tell who is entirely to blame for this issue, but there are many factors that contribute to this awful crisis. Toxic assets, debt, and leverage are all factors that contribute to the failure that banks in america are experiencing. This is scary, and the banks in America are crashing so fast that it frightens me!

A toxic asset is an asset that that has no value, and it is not worth selling on the market because it will be a loss. An example for this would be if someone bought a house and payed $200,000, and they planned on selling it for $300,000 so they could make a profit. However, the demand for housing went down, and they most they could sell their house for would be $100,00. This would be toxic asset because they would not be making a profit off this house, they would be losing money. This is happening all over America, and the people are suffering because of it.

Another contributing factor the this sudden recession in America is debt. In my opinion the banks are making it too easy for someone to take out a loan. Some of the people that are taking out these loans have no way of paying them back. For example, if  someone wanted to purchase a house they would go to the bank and take out a loan, and they would slowly pay it back. But, what happens when the people getting the loans run out of money? When this happens the bank also suffers because they are not taking the money from the people that is needed. In America right now this is happening to millions of people, and the bank is lending out more than they have, and if the people do not pay it back they are losing a great deal of money. 

Liability can be a great thing for people if it works out sucesfully. Liability is when someone takes a product that they paid $1000 for, and then they sell it for $1200, so they are making a great profit from this.  The problem with this is that it does not always sell like they would like it to. This is happening in America in the housing business today. Houses were on great demand, and because they were on such high demand they were selling for very expsensive prices. So many contractors were building houses thinking they could sell them and make a large sum of money. Suddenly the economy started to crash, and they houses were no longer on high demand, and the prices dropped. As a result of this many contractors lost money, and there are many new houses sitting empty because no one can afford to buy them. 

I think this crash of banking in the United States is really scary and real. Living in Canada I don't think we realize the effect that this has on us as Canadian citizens. I think it is important for us to be aware of this issue, and help deal with it because maybe some day in the future it could happen to us. Things like debt, liability, and toxic assets are all factors of why the banks of America are experiencing this devistating crisis. I hope that this will come to an end in the future, but I am sorry to say that honestly I don't think it is going to happen any time soon. America is so deep in debt that it will take a lot of work to big themselves out. I think it is important that we keep a positive attitude and hope for the best.