The municipalities are tiny. Only Narvik can be called a town. Previously there were rules restricting elected municipal representatives from making such huge economic decisions, but they were recently changed. Terra, of course, leapt at the chance of lobbying rural politicians, being generous with wine, sports tickets, travel... The politicans in question have maybe a couple of hundred of voters behind them each.

But even if the politicians thought betting against citibank was a good idea, why didn't they at least call in an independent expert?

Because Terra made them promise not to, as part of the deal.

It's a con, pure and simple. Pity they got away with it.

You must mean that Countrywide services $55 billion in federally-insured or guaranteed debt, not actually owes them that money. The government doesn't lend money directly to lenders, not at that amount anyway.

Credit in this country used to be safe, safer than in the Third World. This was the result of the government getting involved in the guarantee process, which had to do directly with the 30 year Treasury bond (now 10 year) being the "safe harbor" investment of the world as the US government had the best credit in the world--certainly safer than some hyperinflationary Latin American country. Without those guarantees by Fannie or Freddie or the FHA house credit would be as tight as in Honduras.

Of course, all that could change with the mountain of debt we've piled up under our Dear Leader...

Just spent a little time looking at CNN Money and they report sub-prime lender Countrywide is in hock to to a federal or semi-federal agency to the tune of 55 Billion. The agency doesn't want to call the loan because it would put 'banks at risk.'

When they got rid of the Glass Stegall act, which was instituted for a VERY GOOD REASON during the depression, they hooked, again, the risky markets with the banks. Democrats and Republicans did this under Clinton I. This was part of 'deregulation,' which has been an on-going disaster.

IE, the same thing could happen and the banks could be at risk. We saw the giant English bank, Northern, recently go bankrupt, the first bankrupty they have had in over a 100 years.

I think the Mexicans are prepared for collapse, which is why they don't use loans. A good 'hedge' might be buying a home safe for cash.

I was surprised to find out recently how unpopular credit is in Mexico, especially in Guadalajara. Mortgages are virtually unheard of. Almost everyone owns their homes, from the fanciest colonial villas to the most humble haciendas. Every car you see on the road was paid for with cash. Few stores accept credit cards or debit. Cash is king. Banks and other financial institutions are doing their damdest to get people hooked on credit, but no one's biting. People seem to like things the way they are.

Yes, I do realize that Mexico is a third world economy. But it's an economy that''s a lot more resistant to sudden shocks than than the States or Canada, or the U.K, where almost no one actually owns their homes or their vehicles, or even their furniture and home electronics, in many cases. That may end up being the model for our society after the dust settles.

But I am shocked that a $100 billion dollar bank would be stupid enough to give it to them. Some of these mortgage bank executives have made literally hundreds of millions of dollars over the past few years offering these obviously fraudulent mortgages. These guys were supposed to be the best and the brightest - clearly they were only the crookedest. They should be "foreclosed" on as well, forced to surrender their ill-gotten gains, and spend the rest of their lives behind bars.

Thanks Mr. Leonard for being the only person on Salon consistently paying attention to economics.

You might not feel sorry for shmucks who somehow get a $625,000 mortgage on a $150,000 house, but unfortunately this subprime crash is going to affect the whole world economy... the value of the dollar, the employment rate, interest rates, loans, 401K stock value, your mutual fund if you have one, etc.

Pay attention. Then you realize the whole capitalist economy is one big crap shoot, run by greedbags, and you might think that an economy owned and run by regular people might not be such a bad thing.

Lifestyle financing has a double edge. Like paying for your kids expensive private school and summer enrichment programs too. So while dad gets a 46" flat screen and mom gets a Lincoln, the kids get Ye Olde Cambric Preparatory Accelerated Academy. Which for them's not a deal, is it? You could go all ghetto fabulous and buy an Escalade with satellite TV, a shark tank and 30" rims, or you could invest in your own future and the future of your children.

In the end, putting new purple aluminum siding on the double wide is just trailer trash being trailer trash. The amount of money they have doesn't change that.

Moneylender says

Look the whole banking system is corrupt.

As long as money is created out of NOTHING as an interest bearing DEBT we are all enslaved from cradle to grave.

I admire the Nordic model, but it cannot reach it's full potential under the system of creation of money / debt.

The international bankers dictate your life.

The investors got what they deserved - they took high risk loans and they lost big. The woman who is about to lose her home should lose it, and she should be required to pay the difference between it's value and what she owes. She can start by selling her Lexus. That really annoys me. I would love to own a Lexus, but I can't afford one. I drive a very basic 6 year old Camry, and it's a great car. Not a Lexus, though. She conned the bank - lied on legal documents. They all deserve to lose.

This is one guy who doesn't feel sorry for anybody who took out a $695,000 mortgage when they only make (ahem) $100,000. Am I supposed to believe that the closing attorney/escrow officer forgot to point out the monthly payment? There are dozens of websites with free online payment calculators. I calculated that a loan that size, at 7.99%, assuming it's fixed (which it probably isn't), over 30 years costs a staggering $5,094.82 per month--before saving for insurance and property tax. Gee, at a combined pretax income of $100,000, the debt-to-income ratio on the loan is...61.13%. Again, before the other housing costs are added in, income tax, and, oh, food.

Sure, Ameriquest, Argent and Citi were stupid to make these loans, but let's not discount the stupidity of the borrowers who thought their homes were magical piggy banks that would never stop giving them fresh money.