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By James Kwak
The recent financial crisis began at least in part as a housing crisis. The toxic assets that initially threatened to bring down the global financial system were largely based on subprime residential mortgages; as borrowers began defaulting on those mortgages, whole classes of complex securities began plummeting in value.
The other side of banks losing money on their risky investments, of course, is homeowners losing their houses through foreclosure. In the dark months of September to February, it was common to say that the financial crisis would not end until the foreclosure crisis ended. Recently, however, as major banks have reported death-defying profits, one hears that sentiment less often; perhaps the financial sector can recover even as the foreclosure wave continues to crash down on communities across the country.
Today the Joint Economic Committee held a hearing on the foreclosure crisis, featuring a new report by the Government Accountability Office. And the evidence shows that the foreclosure crisis is very much not over, even if it is fading from the front pages.