The bailout will probably cause both England and the US to print more money, so inflation will follow and then we will all suffer because of that. The more money printed the more money in circulation, the more inflation.

It's great to get this information and a different view point from USA, I'm enjoying your website. Thank you

In Britain I believe that England has been hit far harder than Scotland for 2 reasons. Firstly the Scottish Property market was not overly inflated except in the Oil Area of Aberdeen, thus Housing Prices maintained a steady increase releasing equity to the Homeowner if required. Secondly, that English Lenders stupidly offerred upto 125% mortgages which meant homeowners in England would owe more than their property was worth in an inflated market. With Interest Rates stagnant or on an increase (even despite the Bank of England decrease) together with no equity in their property and the cost of essentials ever increasing, it is no wonder that people then struggle to repay their mortgage in England and that the English repossession rate is out of control.

It is because of a financial crisis!

I just don't understand how you will let someone encourage you to purchase a home that's cost to much for your income.

The introduction of sub-prime mortgages and loans to low-and middle-income families and individuals was one factor for the debacle. They were given these deals at "low" rates at the start of the contract; banks then imposed "high" fees and surcharges just to burn the consumers. Banks and other financial institutions won in the game ... consumers lost big in the deal. Chief Executive Officers -- with their big bonuses -- on Wall Street was a second factor. They obtained up to $30 and $40 million in retirement packages and severance pay. Consumers were left to bear the responsibility of cleaning up the garbage when a corporation went bankrupt. Thiese examples are two significant reasons why America's economy has gone down the tank. Barack Obama will be America's next president come November 4, 2008!!

Excellent overview article; however, let's name names: Fannie Mae & Freddie Mac began giving loans to people who couldn't afford them. "Stated Income" loans means that you don't have to prove anything with tax & income records...no wonder the loans fail! The CEOs of those huge entities were Franklin Raines & Jim Johnson. Those two flunkies---who ran their companies into the ground while taking home huge bonuses---have found new jobs with Barack Obama's campaign---as ECONOMIC ADVISORS! And who has gotten the biggest donations to their campaigns for years? All Democrats: Chris Dodd, Barney Frank, Obama...Vote the Democrats OUT before we become the "United Socialist States of America"!

I read today the although we, the taxpayer, paid some £37 billion to aid the financial crisis, the Financila Sector has paid out £17 billion in bonusses. I say let them sink!

The roots of the real estate bubble and subprime mortgage disaster go much farther back. Several decades ago, the tax policy concerning capital gains exclusion on residential real estate in the US changed drastically; the amount which could bypass taxation increased several times over the 80's and 90's, helping to fuel the turnover of homes and, combined with lowered interest rates and relaxed credit standards, to increase selling
prices far beyond any actual increase in intrinsic value. Combined with decreases in the maximum taxation rates for long term capital gains, this regressive tax policy fueled bubbles in several investment categories.
In the near future, a small part of this policy will be changed when new Capital Gains Exclusion rules for residential real estate go into effect in 2009.

The problem goes back a long way. The US for whatever reason has always tried to interfere in other countries by using whatever methods they thought appropriate. The US arms companies and their investors love war, they get paid twice, first arm both sides, then pick a side to support using flawed logic (or gunboat diplomacy)
start a war, and then get paid again to supply more weapons and rebuild the infrastructure destroyed by war.
Move on and start again. The US has never paid the going rate for energy that the rest of the world has to pay for in devalued US dollars. Until the vast majority of Americans learn that another world exists outside of the USA the mess will continue. Grow up America and accept responsibility for your own actions. Stop trying to get the rest of the world to bail you out.

Actually, the truth is, when the subprime borrowers began to adjust their mortgages, more NON OWNER OCCUPIED loan programs began to surface at 90-100% Loan to Value with incredibly high debt to income ratio allowances! Investors went wild buying every piece of property they could get their hands on and convincing many of the "subprime" borrowers to sell to them instead of refinance. When oil prices rose, inflation went up, and unemployment went up causing renters to downsize. Property values began dropping dramatically and investors began dumping properties leaving the banks to sell them and neighbors values at even greater risk. Many investors that saw their peers make huge profits on flips relied on this action and did not get it so they ran. To verify, review the bank sales of properties that were owned by people who owned more than one unit...you will find the truth right there.
Poor borrowers struggling to maintain their one unit...usually not a rental but their home, still proved to underwriters that they could pay the bill or the underwriters would not have said yes to the loan. Let's not blame the hardest working people in America for the mess that greedy investors looking for a way to not take on their risk made. If I hear "subprime" caused this one more time I think I will lose my hair. I watched too many investors dump and run to continue to hear that. Now the poor guy still has to foot the bill.

You need to get your facts straight. Lehmann was NOT an insurance company, but an investment bank. AIG is the insurance company which is being bailed out. This problem didn't start in the mid 90's either..it started after 2001 when the tech bubble burst. The banks started low-income people out at LOW teaser rates which then ADJUSTED to much higher rates. Those are just the errors in the first two paragraphs.