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This is with reference to the two-part article on the US sub-prime crisis (Business Line, February 1 and 2) He has delved deep into the capitalist malaise of greed which brought about the economic crisis arising from lending to non-credit worthy borrowers for splurging on the malls and the banks securitising such loans and selling them to investors who had actually bought insecure securities.

Such lending boosted real-estate prices and further lending was done against the appreciation. So when the bubble burst and the real-estate prices crashed, the mortgagees could not pay back the loans and many declared insolvency.

To save the situation, political means were resorted to by extending time for loan repayments and the Fed cutting interest from time to time. Because of the globalised economy, the sub-prime lending had a global impact and hit other economies.

What one witnesses in the US economic downslide is the bizarre face of capitalism which contains the seed of self-destruction within itself. It is worth watching how the US administration, the banking system and the Fed resolve the crisis and move ahead.

N. Hariharan Coimbatore

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