Did California Cause the Great Recession?

Dan Walters from the Sacramento Bee doesn’t think so:

But nine of the 10 top issuers of subprime and no-documentation mortgages were headquartered in California, and the state has been ground zero for the collapse of those mortgages as adjustable interest rates “reset” upward, having recorded more than a half-million foreclosures and other symbols of distress.

But aren’t jobs leaving California?

The Republicans released spreadsheets, obtained from Nevada’s economic development department, listing businesses that had relocated from California over the last five years. It was, to put it mildly, unimpressive, just a couple of thousand jobs.


21 Responses to “Did California Cause the Great Recession?”

  1. 1 Cole Scharton May 17, 2009 at 10:59 AM

    Just because “9 of 10 top issuers of subprime and no-documentation mortgages were headquartered in California” does not mean the homes themselves were all located in California, or that California as a state is responsible for the recession. There are many reasons people may be leaving California to relocate their business, the few thousand jobs, possibly because to own a business in California includes some of the most expensive land and some very high state taxes. I am not saying we haven’t contributed to the recession, every state has, and we have certainly done more to amplify its effects than other states, I am just saying we did not start it and are not responsible for it. For instance, Phoenix Arizona has a much higher numbers for homes in foreclosure do to the zero interest upside down mortgages.

  2. 2 Ally S. May 17, 2009 at 11:48 AM

    I think that it isn’t fair to say that California alone caused this Great recession. Granted, “nine of the 10 top issues of subprime and no-documentation mortgage” were located in California, and a banking crisis was created on behalf of an “unsustainable housing bubble” (Walters). However, similar problems are happening all across the United States, not only in California but also in other high-growth states such as Florida, Arizona and Nevada. I feel like because California is one of the bigger states, its gets that much more attention compared to other smaller states.

  3. 3 Dennis K May 17, 2009 at 3:45 PM

    Don’t forget that cost of living is probably cheaper in other states other than california.Housing is cheap too.

  4. 4 Nikolas Bunton May 17, 2009 at 6:28 PM

    I agree, bigger states with higher growth rates may appear to be the cause of this issue, but in reality these states (California, New York, Florida) are simply magnifying the problem rather than actually causing them. It is also true that in these bigger states the cost of living is higher, which can lead to this misperception.

  5. 5 Tom Jones May 17, 2009 at 6:43 PM

    Even though “nine of the 10 top issurs of subprime and no documentation mortgages were headquatered in California” does not mean California was the prime suspect of the recession. Michigan as well could have been a suspect due to there major hit in the automobile market in Detroit. The major reason for this recession are these foreclosures which banks are making bad loans to people with average credit who can not pay there morgage so they finance the value of the house which then puts the in a major debt. Banks are now having to get full security on there loans so they do not make any more bad loans which makes the banks and the governments have to take a loss.

  6. 6 Simon Kudus May 17, 2009 at 7:10 PM

    It started in California. After 2001 just about anyone could get a mortgage and buy a home. It then spread across the country. It caught on like wildfire. I think everyone just looked the other way when the loans were approved because owning a home is part of the “American Dream”. But California can’t be blamed for it alone. The Government is the ultimate watch dog and they should have stepped in. No one/state is an “island”.

  7. 7 el Bouzkouri Youssef May 17, 2009 at 7:39 PM

    It is a little bit too much to say that the recession was caused by California ! it started here, and everything spread over the country.Big states such as California, Florida and New york, for sure do influence the rest of the country

  8. 8 Jaysh May 18, 2009 at 1:27 AM

    I wouldn’t blame California alone.
    Incidentally there is an interesting website that is specifically dedicated to recession victims.It offers help and discusses all issues related to recession- http://www.angstcorner.com. It’s worth a visit!

  9. 9 Leonardo Sanchez Econ 101 May 18, 2009 at 12:00 PM

    i dont believe California is soley responsible for the low economy i think if anything CAlifornia is going to be the one to

    pull us out of it. Yes we may have lay off and yes we may have that company 9 out of 10 but just as much California gave us

    amazing jobs like for Tech people in Sunnyville or “Google” or

    for modern are artists in S.F or Hollywood movie stars that help with huge taxes by living in expensive places in L.A. Let

    California do its part as a state and let everyone else do

  10. 10 Claudio M Ramirez May 18, 2009 at 4:01 PM

    I dont think that California was the sole state that caused the so-called “Great Recession”, but it was a key player in the mortgage subprime loan scandal that lead to thousand of foreclosures, but you also have to note that california has one, if not thee highest cost of living in the US and real estate in California is healing faster then many other states that were effected with the mortgage crisis…I guess time will tell on the outcome.

  11. 11 Leticia Martinez May 18, 2009 at 5:21 PM

    I agree that one can’t hold a single state responsible for the entire nation being in a recession. Especially when other high growth states are experiencing the same patterns as California. However, California gets the blame because it is one of the biggest in population and the most prosperous state in the U.S. giving it a lot market power. When it’s the state that grew the fastest, its bound to be the state that falls the hardest.

  12. 12 Santi Orona May 18, 2009 at 10:20 PM

    It is sad that California is losing jobs to other states. However, I don’t think it is right to blame California for the recession of the whole nation. California provides many benefits to the United States. I believe some of the blame comes because of our population, and the power we hold (California would be the 8th largest economy in the world if it were its own nation).

  13. 13 Emily Bonzi May 19, 2009 at 10:25 AM

    It sounds like to me that everywhere people are trying to get to the bottom of how this economic recession began. In truth, it was not soley one group of actots but the amalgamation of one too many poorly made decicions that got the country to the point it is now.

  14. 14 Rachel Sturm May 19, 2009 at 5:13 PM

    I think that it is rediculious to even consider the recession to be based in California. While California has one of the largest populations in the US, it was not just Californians that spent money that they didnt have. For too long has the US depended on credit to get by. I personally chose to not use credit because it does lead to purchases that are nonessentual. I like to know that I own all of something….not just a portion of it.

  15. 15 Pat Kolcum May 19, 2009 at 5:39 PM

    Although California may have effected the great recession more than other states but there is no way that one state caused the whole thing. California has many positives that it produces for the U.S. but people still like to focus on its negatives.

  16. 16 Alysaa McKinney May 20, 2009 at 10:04 AM

    I think the people accusing California are really concentrating on the symptoms rather than the disease. California may have been a big mover in the subprime problems, but it had no influence over the federal reserve and its inflationary credit expansion which actually caused the bubble. If you people want to attribute blame, they should look to the ultimate source, Washington and Alan Greenspan. Hopefully the ‘audit the fed’ bill HR1207 will be able to shed some light on the matter, rather than letting the Federal Reserve act almost completely independently and with little consequence.

  17. 17 Debbie May 20, 2009 at 1:35 PM

    Like everyone has stated, California should not and can not be blamed solely for the state of the mortgage industry. However, had the key people, not looked away and seen what could have happened (that actually did happen), maybe, the situation would have been different. The fact of the matter is that it has happened and California has been adversely affected just as much as other states if not more. Because California has such a high cost of living, doesn’t help the situation either.

  18. 18 Carl Hernandez May 20, 2009 at 8:28 PM

    I believe the housing crisis started in California because the prices were so inflated here that when people would finance them it hurt them in the long run becuase now prices started to drop and nobody could afford to make their payments.

  19. 19 T May 25, 2009 at 10:11 PM

    California has the biggest economy in the United States and is a trend setter in almost all aspects of course California would be centered around the issue.

  20. 20 quique May 26, 2009 at 10:10 PM

    this does in fact suck that california has so many forclosures but we have to lokk at how expensive it costs to live somewhere else. to live in california it simply costs more therfore more is needed in order to live in this wonderful state

  21. 21 Maricar De Los Reyes August 6, 2009 at 6:56 PM

    It is very human to point fingers at each other for something everyone contributed to. I agree that California probably had a lot to do with the recession, this being one of the biggest states, with a ridiculous standard of living compared to the others. Minimum wage in TN in 2007 while I was living there was $5.65 for goodness sake. But I wouldn’t go as far to say that Cal was the MAIN instigator. Yes, California probably has a lot more to be blamed for than other states, but that’s also why it has suffered the most. The United States as a whole put itself in this rut. Or our leaders did, anyway. How much debt are we in because of the borrowing from other countries? That has a very big impact on why our economy is now in this hole.

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