NY Mag: 10 Years After the Financial Collapse

[PleaseBlitz]

1 minute ago, TD_washingtonredskins said:

 

No, I agree with you. But, to quote Men in Black, an individual person is smart, but people are dumb. If an industry full of experts makes something feasible, I tend to blame them more than I blame all the customers who do it. 

 

So, I'm perfectly fine blaming myself for my individual loss on my house. But I'm not blaming "the people" for the recession. They were enabled to do something that they shouldn't have been enabled to do. 

 

 

 

I've worked in the mortgage industry for 15 years at this point, everything from bottom rung functionary to mid-level executive to mortgage sales guy to, currently, mortgage regulatory lawyer that explains to huge banks why and how they need to comply with the Dodd-Frank rules.  I think people saw market values going up, assumed (stupidly) that it would continue forever, and threw all logic and caution to the wind to make sure they got their piece.  There were plenty of people that saw how dumb that was, but there were also plenty (millions and millions) of people that were just greedy.  So I blame the industry and the consumers equally.  One couldn't do what they did without the other.  

[twa]

5 minutes ago, PleaseBlitz said:

 

Your last sentence was exactly the problem. 

 

Yep, and many degrees are the same way.

 

Being a poor working stiff it didn't impact me much.

 

 

[PleaseBlitz]

4 minutes ago, zoony said:

 

Well, youre a lawyer so you see the hole in your argument.  And you also now have a family, so you know Im right.  Its okay to agree

 

I do have a family.  I think your comment is "Terrell Owens holding a mock Hall of Fame ceremony" level stupid.  I don't think I'm more worthy of having a job because I have a family (I think I'm more worthy of having a job because I'm smarter and work harder than everyone else  )

[zoony]

41 minutes ago, BenningRoadSkin said:

 

Everyone lost and is still losing except for the crooks who got away with it and the 1% who have consolidated most of the world’s wealth.

 

This I dont disagree with, though the crash did not occur as a result of crimes, no matter which youtube documentary you watched.  Its comforting to think that, but the truth is far more interesting.  Financial markets are too complex for people to understand, most notably by those who comprise them

1 minute ago, PleaseBlitz said:

 

I do have a family.  I think your comment is "Terrell Owens holding a mock Hall of Fame ceremony" level stupid.  

 

Please, lets hear more about the 22 year old who had to go back to law school to find something she was passionate about.  

 

Just jokes, Im sure it sucked for millenials.  Never denied that.  Just that it paled in comparison to middle aged americans and those who had the weight of others on their shoulders.  In some ways this might be the most millenial of millenial threads ever

[Larry]

6 minutes ago, PleaseBlitz said:

 

Your last sentence was exactly the problem. 

 

It was part of the problem.  

 

Part of the problem was that banks were perfectly willing to give people loans which they knew the buyer couldn't afford.  

 

I assume that their reasoning was that hey, the bank couldn't lose money on the deal, so why not?  At least in my imagination, the bank's reasoning was along the lines of:  

 

"OK, we've got a minimum-wage employee applying for a zero-money-down mortgage on a $450K home, with terms of 2% interest, and interest-only payments, for the first five years, and then variable rates after that.  Payments are going to be $500/month for the first five years, and then $1200/month after that.  The guy can't afford $1200/month, he only makes $1300/month.  But he can make $500/month.  So, he's going to default in five years.  But if we make the loan, then we'll get $500/month interest for five years, and five years from now, the house will probably be worth $550K, and when he defaults, we'll generate foreclosure costs that will let us get all of the $650K.  So, we'll get 2% interest for five years, and then we'll get our money back, and $100K in appreciation on the house.  So who cares if he defaults, we'll make money anyway, because, as we all know, real estate prices never go down."  

 

[PleaseBlitz]

3 minutes ago, zoony said:

 

 

Please, lets hear more about the 22 year old who had to go back to law school to find something she was passionate about.  

 

Just jokes, Im sure it sucked for millenials.  Never denied that.  Just that it paled in comparison to middle aged americans and those who had the weight of others on their shoulders.  In some ways this might be the most millenial of millenial threads ever

 

I think your comment was the most Boomer comment ever.  "We caused this, but really, everyone should have the most concern for us and our hardships and the younger people should stfu."  

 

Boomers, at that point, had decades of experience in whatever field they were in.  Maybe they had to take a paycut, but they were first in line for whatever jobs were available.  Younger people got dick.  If a Boomer with 20 year's experience lost out on a job to a younger person who, maybe, had had an internship, then I don't really feel bad for the Boomer.  

[zoony]

Just now, PleaseBlitz said:

 

I think your comment was the most Boomer comment ever.  "We caused this, but really, everyone should have the most concern for us and our hardships and the younger people should stfu."  

 

Boomers, at that point, had decades of experience in whatever field they were in.  Maybe they had to take a paycut, but they were first in line for whatever jobs were available.  Younger people got dick.  If a Boomer with 20 year's experience lost out on a job to a younger person who, maybe, had had an internship, then I don't really feel bad for the Boomer.  

 

Im Gen X dumbass

[PleaseBlitz]

Just now, zoony said:

 

Im Gen X dumbass

 

I meant at heart. 

 

[PleaseBlitz]

4 minutes ago, Larry said:

 

It was part of the problem.  

 

Part of the problem was that banks were perfectly willing to give people loans which they knew the buyer couldn't afford.  

 

I assume that their reasoning was that hey, the bank couldn't lose money on the deal, so why not?  At least in my imagination, the bank's reasoning was along the lines of:  

 

"OK, we've got a minimum-wage employee applying for a zero-money-down mortgage on a $450K home, with terms of 2% interest, and interest-only payments, for the first five years, and then variable rates after that.  Payments are going to be $500/month for the first five years, and then $1200/month after that.  The guy can't afford $1200/month, he only makes $1300/month.  But he can make $500/month.  So, he's going to default in five years.  But if we make the loan, then we'll get $500/month interest for five years, and five years from now, the house will probably be worth $550K, and when he defaults, we'll generate foreclosure costs that will let us get all of the $650K.  So, we'll get 2% interest for five years, and then we'll get our money back, and $100K in appreciation on the house.  So who cares if he defaults, we'll make money anyway, because, as we all know, real estate prices never go down."  

 

 

Your "banks reasoning" is not close.  It assumes that the "bank" that makes the loan is even a "bank" that keeps the loan for more than 24 hours.  That is not how the industry works, and why I reference mortgage backed securities in one of my earlier posts.  

 

If you want an entertaining primer, I would read Liar's Poker by Michael Lewis. If you want a boring primer, then here:  https://www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf

 

[Sticksboi05]

53 minutes ago, PleaseBlitz said:

 

I agree with your overall sentiment, but saying that the crisis was caused by a handful of people, and not millions of people, is incorrect.  The handful of people figured out that they could make lots of money in mortgage-backed securities and, at the same time, make credit cheaper (and riskier) for everyone.  But millions of people, making their own decisions, took out those risky loans and either overextended themselves or lied to get homes they couldn't really afford.  The few made it possible, the many (practically all boomers) actually made it happen.  

 

True but those loans should never have been given out and then doubled down on and ultimately, the greed from knowing you could profit off the backs of uninformed common folk was the final straw.

 

Granted, you would think grown ass adults would figure out what they can actually afford so....

[PleaseBlitz]

Just now, Sticksboi05 said:

 

True but those loans should never have been given out and then doubled down on and ultimately, the greed from knowing you could profit off the backs of uninformed common folk was the final straw.

 

Well, I think that's where we differ.  I don't view millions of American consumers are "uninformed common folk."  Just the south and midwest.

[TD_washingtonredskins]

4 minutes ago, PleaseBlitz said:

 

Well, I think that's where we differ.  I don't view millions of American consumers are "uninformed common folk."  Just the south and midwest.

 

But that's the crux of my "a person is smart but people are dumb" logic...

 

Each and every individual weighed his or her own risk and came up with scenarios on how, though they are stretching, maybe they could make this work. We are individuals, so we make micro-economic decisions. It shouldn't be our concern how our choices fit into the larger macro-economic landscape. So, I get that millions taking that same risk led to this collapse, but that's the job of someone higher than an individual to legislate and prevent. 

[zoony]

38 minutes ago, Larry said:

 

It was part of the problem.  

 

Part of the problem was that banks were perfectly willing to give people loans which they knew the buyer couldn't afford.  

 

I assume that their reasoning was that hey, the bank couldn't lose money on the deal, so why not?  At least in my imagination, the bank's reasoning was along the lines of:  

 

"OK, we've got a minimum-wage employee applying for a zero-money-down mortgage on a $450K home, with terms of 2% interest, and interest-only payments, for the first five years, and then variable rates after that.  Payments are going to be $500/month for the first five years, and then $1200/month after that.  The guy can't afford $1200/month, he only makes $1300/month.  But he can make $500/month.  So, he's going to default in five years.  But if we make the loan, then we'll get $500/month interest for five years, and five years from now, the house will probably be worth $550K, and when he defaults, we'll generate foreclosure costs that will let us get all of the $650K.  So, we'll get 2% interest for five years, and then we'll get our money back, and $100K in appreciation on the house.  So who cares if he defaults, we'll make money anyway, because, as we all know, real estate prices never go down."  

 

 

All of that ultimately didnt matter as it relates to the great recession, though i think it has been the most politicized part of the debate.  I find that to be a shame, because it takes peoples eyes off the real problems.

 

Mortgage bubbles happen, and they are never good.  This one was among the largest, and by itself would no doubt have caused a recession.  But the GREAT recession was about the collateralization of mortgage securities and the swaps taking place on that debt.  Financial instruments that were misunderstood by those creating them, trading them, insuring them, and above all, rating them.  Thats what caused TARP, thats what caused the bond market and subsequent stock market crash, and thats what caused the great recession. 

 

Id like to say that we are smarter, but right now there are hundreds of thousands of millenials working on wal street doing the same dumbass ****.

 

I do think mortgage lending has tightened greatly, so we wont see that domino effect again any time soon, but there are other bubbles caused by decades of cheap money and quantitative easing.  Auto loans and student loans are 2 that worry me greatly, for instance.

 

Also, if you are politicizing this problem, you are a giant dumbass, and worse, you are part of the problem.  This is a problem that spans political parties, generations, and any other demographic one might conjur in order to score cheap political points and win elections with said dumbasses.

 

This is a problem for all of us, lets start acting like it

[PleaseBlitz]

6 minutes ago, TD_washingtonredskins said:

 

But that's the crux of my "a person is smart but people are dumb" logic...

 

Each and every individual weighed his or her own risk and came up with scenarios on how, though they are stretching, maybe they could make this work. We are individuals, so we make micro-economic decisions. It shouldn't be our concern how our choices fit into the larger macro-economic landscape. So, I get that millions taking that same risk led to this collapse, but that's the job of someone higher than an individual to legislate and prevent. 

 

I agree 100% if you change the word "scenarios" to "fictions."  I understand nobody wants to blame "the people" and the need to find a villain (which bankers so easily fit the bill).   Honestly, I think @Sticksboi05 said it pretty well:  "you would think grown ass adults would figure out what they can actually afford so...."

 

[TD_washingtonredskins]

4 minutes ago, PleaseBlitz said:

 

I agree 100% if you change the word "scenarios" to "fictions."  I understand nobody wants to blame "the people" and the need to find a villain (which bankers so easily fit the bill).   Honestly, I think @Sticksboi05 said it pretty well:  "you would think grown ass adults would figure out what they can actually afford so...."

 

 

I'm doing an awful job of explaining...

 

I'm all about personal accountability. I don't feel bad if someone bottoms out because I don't believe "the banks tricked us" or anything. I blame each and every individual for each and every individual's decision to over-extend. I just stop short of putting the recession on the collective people because it's not anyone's job to worry about that. You take on a level of risk you are comfortable with and deal with the ramifications. 

 

BUT - it's someone else's job to see the big-picture impact to the economy or the market. So, no, I don't blame millions of individual Americans for the recession and housing bubble...I blame the entities that allowed that environment to exist. And, I don't blame the entities for any individual's situation - I blame the individual. 

 

Does that make sense? 

[DCSaints_fan]

2008 may have been worse than 2001 downturn (which actually preceded 9/11), but graduating in 2001 wasn't exactly kind to me either.  I graduated in CS, and first job I got after graduating college was my neighbor paying me for hauling large cement boulders out of his backyard from a broken up old pool.  In 95 degree weather.   I didn't actually get a skills appropriate job until 2009.    Had I graduated just two years prior, probably I would have fared alot better

[TD_washingtonredskins]

1 minute ago, DCSaints_fan said:

2008 may have been worse than 2001 downturn (which actually preceded 9/11), but graduating in 2001 wasn't exactly kind to me either.  I graduated in CS, and first job I got after graduating college was my neighbor paying me for hauling large cement boulders out of his backyard from a broken up old pool.  In 95 degree weather.   I didn't actually get a skills appropriate job until 2009.    Had I graduated just two years prior, probably I would have fared alot better

 

You would have. 

 

I graduated in 1999 with very slightly above-average grades from a good, not great, Virginia school (JMU). I got offers from multiple IT companies and had a signing bonus. They were hiring people just to have bodies without any projects assigned. 

[PleaseBlitz]

7 minutes ago, TD_washingtonredskins said:

 

I'm doing an awful job of explaining...

 

I'm all about personal accountability. I don't feel bad if someone bottoms out because I don't believe "the banks tricked us" or anything. I blame each and every individual for each and every individual's decision to over-extend. I just stop short of putting the recession on the collective people because it's not anyone's job to worry about that. You take on a level of risk you are comfortable with and deal with the ramifications. 

 

BUT - it's someone else's job to see the big-picture impact to the economy or the market. So, no, I don't blame millions of individual Americans for the recession and housing bubble...I blame the entities that allowed that environment to exist. 

 

Does that make sense? 

 

It makes total sense, I just don't agree that the people who made each individual decision to overextend themselves, or buy a house they couldn't afford, or take out a HELOC to buy a Benz, are blameless.  They made ****ty decisions.  Maybe they weren't thinking about the global consequences, but thinking about it on the microeconomic level should have been enough to realize they were being dumb.  Additionally, they voted in the decision makers at the time with no interest in regulating the financial markets and LOVED Greenspan for helping to create the artificially cheap flow of money.  Those same people are STILL fighting to kill the regulations put in place after the crisis, gut the CFPB, and incentive businesses to do the exact same **** again.  

[TD_washingtonredskins]

1 minute ago, PleaseBlitz said:

 

It makes total sense, I just don't agree that the people who made each individual decision to overextend themselves, or buy a house they couldn't afford, or take out a HELOC to buy a Benz, are blameless.  They made ****ty decisions.  Maybe they weren't thinking about the global consequences, but thinking about it on the microeconomic level should have been enough to realize they were being dumb.  Additionally, they voted in the decision makers at the time with no interest in regulating the financial markets and LOVED Greenspan for helping to create the artificially cheap flow of money.  

 

That's fair...I just don't think any individual citizen (or even a large collection of them) should be expected to understand the macro consequences of their actions when it comes to something that feels so individualistic. 

 

When I'm deciding on buying a house (and granted, not everyone put this much thought into it), I'm thinking of my financial situation, escalation of a rate, inflation, my potential raises, other realistic negative things, etc. I'm not thinking about what might happen if millions others overextend and then aren't able to pay. In my cost-benefit analysis, my worst-case scenario is my individual foreclosure or inability to keep the house. 

[PleaseBlitz]

1 minute ago, TD_washingtonredskins said:

 

That's fair...I just don't think any individual citizen (or even a large collection of them) should be expected to understand the macro consequences of their actions when it comes to something that feels so individualistic. 

 

When I'm deciding on buying a house (and granted, not everyone put this much thought into it), I'm thinking of my financial situation, escalation of a rate, inflation, my potential raises, other realistic negative things, etc. I'm not thinking about what might happen if millions others overextend and then aren't able to pay. In my cost-benefit analysis, my worst-case scenario is my individual foreclosure or inability to keep the house. 

 

Totally agreed.  All I'm saying is that,when making that individual cost-benefit analysis, one should reasonably consider the potential for foreclosure is pretty high when they know they can't afford the house without a temporary, artificially low teaser rate with interest-only payments and a balloon in 5 years and where they had to misrepresent their income just to qualify for (which, under today's laws and arguably even back then, is fraud).  And yet, millions and millions of people did that anyways, and those people deserve just as much blame collectively as the banks and investment firms that enabled that behavior.  

[mcsluggo]

42 minutes ago, Larry said:

 

It was part of the problem.  

 

Part of the problem was that banks were perfectly willing to give people loans which they knew the buyer couldn't afford.  

 

I assume that their reasoning was that hey, the bank couldn't lose money on the deal, so why not?  At least in my imagination, the bank's reasoning was along the lines of:  

 

"OK, we've got a minimum-wage employee applying for a zero-money-down mortgage on a $450K home, with terms of 2% interest, and interest-only payments, for the first five years, and then variable rates after that.  Payments are going to be $500/month for the first five years, and then $1200/month after that.  The guy can't afford $1200/month, he only makes $1300/month.  But he can make $500/month.  So, he's going to default in five years.  But if we make the loan, then we'll get $500/month interest for five years, and five years from now, the house will probably be worth $550K, and when he defaults, we'll generate foreclosure costs that will let us get all of the $650K.  So, we'll get 2% interest for five years, and then we'll get our money back, and $100K in appreciation on the house.  So who cares if he defaults, we'll make money anyway, because, as we all know, real estate prices never go down."  

 

 

not by that point... by that point Banks weren't holding the mortgage risks anymore, they were just originating them, and then getting paid to service them.   Their reasoning was that they could get the origination fees associated with a new mortgage, and then offload the risk through a securitization, but still continue to get fees for servicing the loan, and probably actually got MORE fees if they got to go through the foreclosure process on a loan that they originated but no longer carried the credit risk for.   Banks weren't hurt directly by the mortgages they originated... they were hurt indirectly because they overleveraged themselves to speculate on markets --- including buying the crap Mortgage-Backed-Securitizations of OTHER ****ty morgage originators, but that was only a portion of their drunken overleveraged shopping spree 

 

Because on top of the crappy loan origination incentives, management incentives were also all focused on the short run upside.  Your stock option peaked if the share price peaked.... if it didn't peak, then you got no bonus, but you had no loss ... AGAIN, all upside with no downside risk..... pedal to the medal, dude!

 

 

the incentives were ****ed up for the banking industry, and the individuals in the banking industry followed those incentives to make ****ty decisions.  We are right now rolling back regulations to restore that world of ****ty incentives (and very high short run profits for donors).   We know better, but again... are politicians incentivized to protect theoretical widely dispersed future benefits (individuals not getting screwed several years down the road) or are they incentivized to "protect" a few large donors that would love to capitalize on the capital insecurity to make huge windfall profits right now?

 

 

 

 

(I will point out that one of the parties seems much focused on protecting the rights of individuals to profit by sowing instability in the market.) 

[TD_washingtonredskins]

22 minutes ago, PleaseBlitz said:

 

Totally agreed.  All I'm saying is that,when making that individual cost-benefit analysis, one should reasonably consider the potential for foreclosure is pretty high when they know they can't afford the house without a temporary, artificially low teaser rate with interest-only payments and a balloon in 5 years and where they had to misrepresent their income just to qualify for (which, under today's laws and arguably even back then, is fraud).  And yet, millions and millions of people did that anyways, and those people deserve just as much blame collectively as the banks and investment firms that enabled that behavior.  

 

That's fair - I just think MORE blame belongs on the people in the industry who allowed for that landscape. They, more than Joe Homeowner, is in a position to focus on the macro view. 

 

I get your point though. 

 

Edit: Here's a pretty crappy analogy...

 

I am in charge of a garden in some very small community. I ask everyone to come and only take what they need and will eat so that there's enough for everyone and the food won't rot at their homes if they don't get to it. But, instead of stepping in and applying stipulations, I let the people determine what that threshold is (or I set it so high as to not make it realistic). When we run out of food in the middle of winter, is that Joe the Blacksmith's fault more than mine? Is he qualified or expected to worry about the big-picture or just take what he thinks he needs and can manage? I was essentially in charge of making sure that very thing didn't happen. 

 

I know it's simplistic, but it's how I view it. 

[Kilmer17]

It's happening again.  Right now.  Because big banks werent punished.  In fact, they were rewarded and the small local banks got screwed.  

[Cooked Crack]

Quote

WASHINGTON (Reuters) - The Trump administration moved on Wednesday to drastically shrink a government agency tasked with identifying looming financial risks, notifying around 40 staff members they would be laid off, according to a person familiar with the changes.

 

[Bozo the kKklown]

20 minutes ago, Cooked Crack said:

 

I really fear the next one is going to be devastating. Maybe even depression levels and no one did much and is doing much to protect us.