Re:The U.S. government’s failed 1890s attempt to forge unity...
by Gibbon1 on Friday June 11, 2021 @03:49PM
(#27477649)
One thing I read about. Before the great depression mortgages were much different than they are after the New Deal Reforms.
Loans were usually interest only. You had to either pay or refinance the principle at the end of the term. Which might be five or ten years.
If you defaulted the lender would take the collateral, all of it.
Critically loans were denominated in both dollars and gold. And could be called in often at any time to be repaid in dollars or gold, which ever was highest.
You can easily see how these could be abused by banks.
If you were a small time farmer during a downturn the price your crops fetch drops, the value of your farm drops. But the price of gold goes up which increases the amount you owe. The bank would then call in your loan and because you can't pay in gold take your farm. Leaving you with zilch.
The above is why FDR closed the banks when he took office. Because banks were strategically destroying the economy.
Loans were usually interest only. You had to either pay or refinance the principle at the end of the term. Which might be five or ten years.
If you defaulted the lender would take the collateral, all of it.
Critically loans were denominated in both dollars and gold. And could be called in often at any time to be repaid in dollars or gold, which ever was highest.
You can easily see how these could be abused by banks.
If you were a small time farmer during a downturn the price your crops fetch drops, the value of your farm drops. But the price of gold goes up which increases the amount you owe. The bank would then call in your loan and because you can't pay in gold take your farm. Leaving you with zilch.
The above is why FDR closed the banks when he took office. Because banks were strategically destroying the economy.