Chapter 2: A Brief History of How We Got Here
Answer the following questions below. Rewrite each question before your answer. The majority of
answers can be found in Chapter 2 of Orman’s book, but some definitions you may need to research
on your own.
1. Explain why Orman thinks greed is the culprit for the financial crisis.
2. In the past, to get a mortgage you had to go through a series of steps; list them.
3. What would happen if the bank didn’t think you were eligible for a mortgage?
How did this protect the bank?
4. Explain what Fannie Mae and Freddie Mac are. What did they do? What did this
5. What happened in early 2000 on Wall Street?
6. Explain what a subprime mortgage is. How did Wall Street bundle them?
7. What is leverage?
8. When you leverage, what are you doing? Give an example.
9. How did Wall Street get past their last remaining obstacle to ramp up the numbers
of subprime borrowers?
10. What were the cracks that began to appear in late 2006, early 2007?
11. What is a foreclosure? What did the rate start to rise?
12. Explain what “being under water” means.
13. “If your neighbor’s home was in foreclosure, that was bad news for you too”
Explain what this means.
14. How many homes were estimated to be lost from 2007-2010?
15. What is the “ugly downside of leverage”?
16. What does Orman think “the Honest Way Out” is for Americans?