Irvinecommuter said:
Tyler Durden said:
Irvinecommuter said:
qwerty said:
I know what lawyers do.there are too many of you is the problem.
Really...cause the last financial crisis came as a result of having too many lawyers right?
The root cause is because of bad public policy under Henry Cisernos (HUD secretary) & the Clinton administration's desire to see every American own a home. They loosened the standards for what would be guaranteed by the government.
http://www.forbes.com/fdc/welcome_mjx.shtml
http://online.wsj.com/article/SB10001424127887324576304579073111289821626.html
http://www.theatlantic.com/business/archive/2011/12/hey-barney-frank-the-government-did-cause-the-housing-crisis/249903/
which led to companies finding opportunities to make money and acting on it. People are naturally greedy so they acted on that impulse by becoming over leveraged and buying more homes to flip. This worked when housing was going up in value. But housing is not an inelastic good. The price does have an effect on demand. The market blew up when the price became so exorbitant that new buyers could not enter the market and play the game.
The government then allowed the folks who perpetuated the housing run up by flipping and over leveraging themselves to get out of the problem they caused by forcing banks to eat loans that went bad instead of holding them accountable for their own actions. So the borrowers got away with reneging on their obligations at minimal cost to themselves.
However, the current financial crisis is 100% caused by lawyers. If the US government defaults on its bond payments, it will have a longer lasting effect than the collapse of the housing market in 2006.
That's the reason? Repeal of Glass-Stegall? Securitization of mortgages to minimize risk to banks? Complete abandonment of lending standards? Merging of banks with investment firms ? Greenspan dropping rates to nothing so that banks moved the fund into the mortgage market and flooded it with cheap money.
How about the lack of increase in wages for last 30 years which resulted in people going to their homes as ATMs? Funny that The Clinton administration ended in 2000 and the boom started in 2004/2005 but still it all his fault.
You really think that the banks are doing loan modifications because they're being forced to? They're doing because it makes more economic sense in many cases than foreclosing. Banks are not in the business of owning homes, they don't like holding real estate in their portfolio, which require maintenance and transaction fees.
Yes people are greedy...you forget that banks/investment institution are filled with some of the greediest.
Nice, you conveniently did not discuss how the government (mostly lawyers in congress and the white house!) is creating its own crisis by once again risking default.
Greenspan didn't drop discount rates to zero to encourage home ownership. The FOMC did it to encourage economic growth by lowering the cost of doing business for banks. If banks can borrow at a lower rate, they can lend at a lower rate. This would enable the economy to pick up steam.
Loans were being securitized far before the housing market blew up. This was going on in the 1980s as well. Funny how back then people weren't defaulting in massive number either. But what did happen: the S&L bail out - why? Lax oversight by the OTS.
If you had worked for a bank, you would know that people who need loans shouldn't get them. People who deserve them should be given the loans. Don't have credit, well you are S.O.L!
By the government encouraging bad behavior by guaranteeing to purchase non-conventional loans, of course companies were going to try to make more exotic loans. They exist to make money, right? But just because someone is offered something doesn't mean they should accept it. People should have not signed up for things they cannot afford. If they cannot afford their lifestyle, it is time to re-set their wants vs. needs.
Do you accept every credit card offered to you? What about maxing out a HELOC on your home? Why not go and buy 10 new cars? What about picking up your money from the Nigerian prince who emailed you?
Where does your paradigm include personal accountability for the mortgagee? Do you ever see the disclaimer on investments "Past performance is not indicative of future returns"? That is true for any investment or purchase...caveat emptor.
If we are holding companies to such an ethical standard, isn't it also fair to hold the individuals accountable who signed their name to 50 plus page documents to buy the home in the first place? Why didn't they just live within their means and not buy things they could not afford?
Ironically, when folks were making money selling homes and flipping rentals, no one was going back to the bank saying: "here's your cut of the profit since you made it happen for me". But when their money making schemes blew up, they are blaming the organizations that facilitated the transaction "you shouldn't have let me do it". Because success seems to be an individual prize, but failure has to be shared by all, instead of laid solely at the feet of those responsible for their own actions.
