Whose fault is housing crisis? People/banks/gov't?

Sir Lance-alot wrote:

Flagpole,

You are insanely stubborn (of course we all know this about you).

...

But you will only focus on step 1, and ONLY on the party that signed for the loan when apportioning blame??

What a simplistic, silly, point to try and make.

Yup.

But, why anyone would argue with someone who is not so bright, is incapable of admitting he was wrong, will argue endlessly - always needing to get the last word in, and ultimately deletes posts that he doesn't like is beyond me.

If you are aware of all this, then why aren't you thinking it through.Subprime loans have existed long before the crisis. ARM loans were around since 1982. These could easily have been repackaged and bet against all along without the need for new aggressive liar loans, NINJA loans, etc. The financial instruments work, as long as the default rates stay below a certain threshold, and the market goes up.You also don't know if someone took out insurance on your loan.The dependency is circular. Without the new financial derivatives, the demand for loans doesn't increase, the prices for houses don't go up, the opportunity to jump on the greed bandwagon doesn't present itself, as well as many millions of opportunities to "just say no" to really bad loans.What enabled this circle, is new legislation in 1999 and 2000, and new financial instruments outside of regulatory view. Without these innovations, your need to say "no" doesn't even present itself.You give prudent advice, but your advice is arbitrary, and may be too cautious, needlessly barring many from becoming a homeowner and sentencing them to a life of being permanent renters.If I want to carry your logic a bit further, I could claim:- If no one ever borrowed money, no crisis.- If we didn't ever invent banks, no crisis (and fewer wars).- If we still used the bartar system, no crisis.- If Columbus didn't discover America, no crisis. Blame it on the queen of Spain.

Sagarin,

Thanks for that exhaustive rant, but it left me a little confused -- nevermind.

All I was really wondering was if it was correct to conclude that GSEs, FHAs, or whatever played a minor role, as that Pinto pie chart shows a much larger government contribution.

And I'm afraid it's out of "agip's" hands. I think he tried to end it a few pages back. I'm going out to feed the chipmunks now...

Your attempt at extending my logic is ridiculous. Within the parameters of bank/customer relationships, the customer has the ultimate say about whether they sign on the dotted line or not.I'm not barring people from becoming home owners. There's just a time and a place for that. I'm not saying people shouldn't take out loans...I used banks for student loans, once upon a time a car loan, and I have a mortgage.People though SHOULD do the following:1) Fixed rate mortgage ONLY.2) No more than about 25% of your take home pay toward the mortgage (you do 30% with reasonable expectations of more income in the next couple years, then that's fine).3) 3% or more down.4) PLAN to be in the house for 15 years minimum.It's not that hard, but it takes patience. I was 33 before I bought my house.ARMs and other bad-idea loans were used more in the 2000s than previously because of the environment. Housing prices were going up, seemingly to the moon, and not only did potential buyers think they would make easy profit on the rising value of their house, but they feared if they didn't buy NOW that prices would get so high that they never could buy. Well, that was faulty logic, and they got burned. The banks had the same thought and stepped up their already greedy ways, but I EXPECT that from banks. Just like I expect a bear might want to rip my head off.Those people should NOT have taken those loans. 90% of the blame lies with them.I teach my kids not to do drugs. If they ever do, I will NOT blame the person who sold it to them (though I will tell the police who they are to stop their illegal behavior). If my kids do illegal drugs, then that is ALL on them, and I've told them as such...drugs are NOT allowed in my house, so if they bring it into my house, they need to find another place to live.Too many people want to blame governments, corporations, other entities for their own bad decisions. I won't do it. I am right.

Fine. Let's blame the people (borrowers) for their own mistakes. But I want to blame the government for its own bad decisions, and I want to blame investment banks for their own bad decisions.But to "cause" the crisis, we need all the players.Smarter borrowers could have prevented the crisis, as could smarter legislation, and ethical investment banks.

Of the 55-million families with mortgages, 10.4-million of them “are sliding toward failure and foreclosure”---a tragedy that will depress the U.S. housing market for years to come, a result of too many houses for sale and too few buyers.

That’s the blunt conclusion of distinguished economics journalist William Greider, to be published in an article in the November 14th issue of The Nation magazine.

America’s “Economic recovery will have to wait until that surplus (excess houses) is gone, because the housing sector has always led the way out of recession,” Greider says. “The more housing supply exceeds demand, the more prices fall.

The more prices fall, the more families get sucked into the deep muddy.

The vicious cycle is known in the industry as the death spiral.

So far, there’s no end in sight.”

Greider says the solution is to forgive the debtors: “Write down the principal they owe on their mortgage to match the current market value of their home, so they will no longer be underwater.

Refinance the loan with a reduced interest rate, so the monthly payment is at a level that the struggling homeowner can handle.”

Forgiving the debtors is the right thing to do, Greider continues, “because the bankers have already been forgiven.

The largest banks were in effect relieved of any guilt for their crimes of systemic fraud or for causing the financial breakdown---when the government bailed them out, no questions asked.”

Far from a show of gratitude, Greider notes the response of the banks has been ugly. “Right now, these trillion-dollar institutions are methodically harvesting the last possible pound of flesh from millions of homeowners before kicking these failing debtors out of their homes---the story known as the ‘foreclosure crisis.’”

The largest and most powerful banks are standing in the way of the solution and the Obama administration “is standing with them,” Greider adds, “because bankers and other creditors would have to take a big hit if they were forced to write down the debt owed by borrowers.

The banks would have to report reduced capital and their revenue would decline if homeowners were allowed to make smaller monthly payments.”

President Obama, he says, “seems to be playing a sly double game---protecting banks from sharing the pain while proclaiming sympathy for embattled homeowners.” Greider adds, “The government, in effect, has been sheltering banks from facing the hard truth about their condition.”

Banks may be valuing mortgages or mortgage bonds at 85 cents on the dollar when their true market value is closer to 30 cents. “That strengthens the case for a general and orderly write-down now: if many of these loans aren’t ever going to be rapid, then the assets now claimed by the banks are imaginary.”

Greider quotes Stephen Roach, a Morgan Stanley economist and lecturer at the Yale University School of Manaagement, who says, “Some form of debt forgiveness would be a clear positive.

Debt forgivness is a big deal when so many Americans are underwater and unable to keep up with their payments... With debt reduction, people would feel less reluctant to spend money on new things. If you can do that, then companies will feel more confident about future demand, less reluctant about hiring more workers.”

Roach believes the government can instruct Fannie Mae and Freddie Mac, which hold some $1.5 trillion in housing loans or mortgage-backed securities, to take a write-down on their outstanding loans. “Then the government can put pressure on the banks to do the same thing. The banks will resist, but they have to go along if the government is forceful enough,” Roach says.

However, housing-finance expert Laurie Goodman, said the government is making it harder for homeowners to get new mortgages despite the sagging housing market. “Almost every single proposed government action has been aimed at further tightening credit availability,” she told the Senate Banking Committee last September.

With 25 million workers unemployed or underemployed, the President enjoys great popular support for pushing through a massive jobs bill, raising the minimum wage and shoveling money into the pockets of hard-pressed homeowners to help them pay their mortgages.

Instead, as Greider says, Obama has been siding with the banks.

Worse, he keeps squandering tax dollars on foreign wars opposed by the most Americans.

There’s not much left over to stimulate the economy when the Pentagon has sucked up $800 billion in direct costs to wage war in Iraq with indirect costs, estimated by economist Joseph Stiglitz and Linda Bilmes, at a staggering $4 trillion.

Flagpole,

I would like to ask again - can we assume that you would agree that the banks were (are) Victims in this crises?

This would seem to be the only logical conclusion since:

a) aside from their bail outs, banks suffered losses and

b) The banks bear no share of the blame.

Would like to hear your thoughts on to what degree banks are victims here.

Flagpole wrote:

Your attempt at extending my logic is ridiculous. Within the parameters of bank/customer relationships, the customer has the ultimate say about whether they sign on the dotted line or not...

Yes, because the bank clearly does not have the ultimate say about whether or not they lend the money.

You are SO adorable.

S&P just managed to accidentally downgrade Frace. More confidence-inspiring competence from the rating agency the world financial markets trust!

http://www.cbsnews.com/8301-202_162-57323058/sacrebleu-s-p-accidentally-downgrades-france/

Questions:

The derivatives market is over a quadrillion dollars in size (1000 x Trillion). If the entire World GDP is 60 trillion, what percentage of this market is capitalized? Is it even possible to partially liquidate this market?

Banks lower the rates when economy is good.

The growth of mortgage brokers muddied the waters.

Many mortgage brokers hired un-educated salesmen (and women) and worked on commision, began making un-supported promises to many people who believed them. These potential home buyers got great rates. The eceonomy went south with over-sturated market. Rates went up. Ignorant consumers who listened to 'used car salesmen' mortgage brokers, watched their mortgage payments go up up and up until they could no longer make the payments.

The mortgage broker who sold them on the rate, is no longer around.

The consumers ran scared, and no real estate was moving.

We are slowly getting out of this mess.

2014 we could see the light, but it doesn't matter according to the Mayan calendar.

Well, I blamed them all, so you and I agree.1) Banks - 4% of the blame.2) Government - 6% of the blame.3) People who took out bad loans - 90% of the blame.

rekrunner wrote:

Fine. Let's blame the people (borrowers) for their own mistakes. But I want to blame the government for its own bad decisions, and I want to blame investment banks for their own bad decisions.

But to "cause" the crisis, we need all the players.

Smarter borrowers could have prevented the crisis, as could smarter legislation, and ethical investment banks.

Flagpole wrote:

Too many people want to blame governments, corporations, other entities for their own bad decisions. I won't do it. I am right.

No, the banks are NOT victims. Victims don't deserve any blame, and I assigned blame to the banks and have mentioned it several times now (making me know that you're commenting about what I say but not really reading it)...4% of the blame goes to banks specifically.

Baldy wrote:

Flagpole,

I would like to ask again - can we assume that you would agree that the banks were (are) Victims in this crises?

This would seem to be the only logical conclusion since:

a) aside from their bail outs, banks suffered losses and

b) The banks bear no share of the blame.

Would like to hear your thoughts on to what degree banks are victims here.

1) Glad to know that you don't assign any personal responsibility to people. Hopefully don't have any children, because if they ever do anything wrong, you will blame someone else.2) If being correct about the housing crisis makes me adorable then so be it. I would thank you though to refrain from such adoration as that level and kind is reserved for The Lovely Mrs. Flagpole.

Hilariouser and Hilariouser wrote:

Flagpole wrote:

Your attempt at extending my logic is ridiculous. Within the parameters of bank/customer relationships, the customer has the ultimate say about whether they sign on the dotted line or not...

Yes, because the bank clearly does not have the ultimate say about whether or not they lend the money.

You are SO adorable.

TARP isn't the cause of the housing crisis, it is a result of it. Unfortunately TARP was necessary and enabled the banks from going completely under.Also, the Treasury has gained back 99% of the money they loaned out as part of TARP and expect to earn $20 billion profit over time on that money loaned.Get to the point that you accept personal responsibility and no bank can "start their tricks all over again".No bank will "trick" me into anything. Why is it that others are so easily tricked? I'll tell you why...they are greedy and impulsive and want what they want right now. It's irresponsible.I sure hope no crack dealer offers you some crack tonight, because you will surely not be able to resist.

Magic 8 Ball wrote:

Baldy wrote:

Flagpole, since the banks are not at fault, and they suffered from the crises, then by logic they are actually victims, would you agree?

Maybe you missed TARP, where the government loaned (ha ha ha) the banks money so they wouldn't go under. Yes... they were victims. Victims of both borrowers and their own greed. Sadly, the government, with our money, kept them solvent and then let them start their tricks all over again.

Yes we agree. In spite of the fact that I said I didn't want to negotiate percentages, the 90% bothers me most.

In my opinion, Congress failed in executing one of its primary and basic duties, on behalf of the governed.

Some banks and many lending institutions also made some basic primary failures in due diligence and risk analysis.

Investment banks also made some huge gambles in what is their primary business.

Many people (borrowers) made a bad decision in an area that is not their primary source of expertise.

The crisis is that some investment banks (and re-insurance companies) became too big (as a result of some Congressional Acts), made very risky decisions, and then turned to the government to absorb the penalties.

Yet you seem to think that for some reason, the borrowers were 15-22x more responsible for causing the crisis.

I guess this is something we will both have to live with.

Flagpole wrote:

Well, I blamed them all, so you and I agree.

1) Banks - 4% of the blame.

2) Government - 6% of the blame.

3) People who took out bad loans - 90% of the blame.

I'd just like to add my voice to the chorus who think that this perspective is misguided and more than a little offensive.

Some were guilty of making bad choices based on ignorance, unrealistic dreams, or faith in what trusted professionals were telling them.

Some took what they knew about human nature, weaknesses and limitations of borrowers and investors and exploited it to make massive fortunes, with full knowledge of the implications of their actions.

If you want to assess the majority of the blame to the first category, you are a simpleton or a prick.

Flagpole wrote:

1) Glad to know that you don't assign any personal responsibility to people. Hopefully don't have any children, because if they ever do anything wrong, you will blame someone else.

2) If being correct about the housing crisis makes me adorable then so be it. I would thank you though to refrain from such adoration as that level and kind is reserved for The Lovely Mrs. Flagpole.

Hilariouser and Hilariouser wrote:

Yes, because the bank clearly does not have the ultimate say about whether or not they lend the money.

You are SO adorable.

Please feel free to point out where I said that I "don't assign any personal responsibility to people."

Having trouble? I'll help you out there by giving you a hint. I didn't.

So we are left with only one question - Are you stupid or do you just lack integrity in posting?

The banks gave anyone with 10 grand cash the ability to get into a mortage for a 100,000 dollar home. Regardless if they only were making 25-30 grand a year in a manufacturing job that was on the verge of being outsourced.

That's what happened. Jobs went overseas. Factory workers that were making 16-25 bucks and hour had to find work at grocery stores for 9 bucks an hour.

What's to blame is NAFTA and the banks at that time that knew this would happen but went for the very short term money. And that in the end they would probably be bailed out by the government. Becuase they were "to big to fail".