Bush and Obama, Wars and Economy: Power and People in an Age of Limits and Loss 573among investors, so a global savings glut developed as those nations that pro-
duced the most goods also had sizable financial reserves and needed an outlet
for them. In the past, they might have looked abroad for the Open Door, but
with globalization and institutions like the WTO and NAFTA, almost all mar-
kets were spoken for. In America, people with money to spare decided to
speculate in housing. Wealthier individuals, and even the not-so-wealthy, were
lured by low interest rates and began to buy homes in record numbers. This
caused the costs of housing to soar, which led to more speculation, which
reminded some economists and others of the stock crises of the 1920s. The
rich saw housing as an investment, and purchased homes with the idea of
selling them in the future at great profit as prices kept rising. For poorer
Americans, the low, or sometimes nonexistent, interest rates meant they could
own a home and have “the American Dream.” But many of those homeown-
ers, even with low interest rates, were stretched too far and had trouble paying
their house notes. Some economic analysts warned of a housing crisis, anoth-
er “bubble,” but rich Americans kept buying homes as investments while those
at the other end of the economic pyramid kept stretching their finances to get
their own place.
Housing, Americans have long believed, was always a good investment; the
price of houses would never go down, and if they did, they would bounce
back quickly. But in 2008, that idea was tested and homeowners all over
America had a day of reckoning. Bankers had not been simply offering home
loans to potential buyers but, in the aftermath of the Clinton “reforms” of the
banking system, had developed an intricate system, a “scam” some would say,
where they would “bundle” mortgages—put a huge number of loans togeth-
er, some suspect and unlikely to be paid back, into a single unit—and call
them collateralized debt obligations [CDO], an awkward term for a reasonably
basic process. By creating CDOs, bankers sold off hundreds of millions of
dollars in mortgages, took the profits, and left the responsibility for the notes
on another institution. They then backed the CDOs with the equally awk-
ward credit default swaps [CDS], a type of “insurance” where bankers who held
mortgages sold, or “swapped,” their credit risk [in this case, the home note,
which may or may not be paid back] to another institution. That institution
made payments to the seller of the swap and paid off the debts until the con-
tract, the home note, matured. If one party defaulted on a loan, the original
seller paid off the debt, so many purchasers of CDSs were speculating, hoping