If you want to know what happened with the housing market turn on CNBC

[zoony]

I meant Countrywide wasn't purged, not the ARM. The problem is that Countrywide and their peers haven't been shown the door and have yet to face any consequences. They got bought by BofA with government assistance.

oh okay, misunderstood you.

Anyways- you ought to check my 60 minutes thread and watch that interview with Bernanke. He says that people should face consequences, after the fires are put out however.

I hope that happens. While the Fed Chairman doesn't exercise any real power in that regard, it was good to hear him say it. Especially considering how guarded (he has to be) he is with his words.

[GibbsFactor]

oh okay, misunderstood you.

Anyways- you ought to check my 60 minutes thread and watch that interview with Bernanke. He says that people should face consequences, after the fires are put out however.

I hope that happens. While the Fed Chairman doesn't exercise any real power in that regard, it was good to hear him say it. Especially considering how guarded (he has to be) he is with his words.

Bernanke isn't stupid. I will give you that. I just think he's a tool.

[jbooma]

oh okay, misunderstood you.

Anyways- you ought to check my 60 minutes thread and watch that interview with Bernanke. He says that people should face consequences, after the fires are put out however.

I hope that happens. While the Fed Chairman doesn't exercise any real power in that regard, it was good to hear him say it. Especially considering how guarded (he has to be) he is with his words.

I do agree that some people who put us in this position need to face some type of consequences.

[GibbsFactor]

I do agree that some people who put us in this position need to face some type of consequences.

We are.

[wilsonian]

Greed has become the scapegoat in this financial crisis. However, our society runs on greed. That is, individuals pursue their own self-interest. As Adam Smith put it, "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."

What many people forget to mention is how fear balances greed. I may want to become the richest person in the world, but if I make imprudent business decisions, I will face consequences. The fear of bankruptcy compels me to be prudent. If I am not prudent, I will fail. That is the beauty of a free market system and its risk/reward mechanism. Poorly run companies go under and efficiently run companies stay around.

Unfortunately, the government took all fear out of the equation. Moral hazard was everywhere, manifesting itself in Fannie and Freddie, the Community Reinvestment Act, the Federal Reserve and its massive expansion of credit, a tax code that encouraged home ownership, and an ubiquitous mentality that some financial institutions are too big to fail. Banks were only able to lend out all this money because the government gave it to them. And now, thanks to the bank bailouts, we're encouraging the same behavior that got us into this mess in the first place. If a financial institution comes to believe that it will not face any consequences for making stupid decisions, why should we ever expect them to make smart ones?

[jbooma]

Unfortunately, the government took all fear out of the equation. Moral hazard was everywhere, manifesting itself in Fannie and Freddie, the Community Reinvestment Act, the Federal Reserve and its massive expansion of credit, a tax code that encouraged home ownership, and an ubiquitous mentality that some financial institutions are too big to fail. Banks were only able to lend out all this money because the government gave it to them. And now, thanks to the bank bailouts, we're encouraging the same behavior that got us into this mess in the first place. If a financial institution comes to believe that it will not face any consequences for making stupid decisions, why should we ever expect them to make smart ones?

Just because the goverment gave out money to be lended does not mean then the banks should approve loans to those who could not afford it!!!!

Sorry but the government opned the door but the banks ripped it off the hinges. That is like saying my dad gave me his american express card but then at least I know the consequences if I took to much out.

This is why banks and the financial markets need to be babysitted, they can't stop themselves.

This is also an example of the welfare, as long as people can take advantage of it they will.

There were many EDUCATED people that did only ask for what they could afford, and now they are going to suffer like everyone else. Is it that hard hard for the banks to ask them to behave?? Oh wait I thought someone in this thread said that is what self regulation was all about, guess it didn't work to well here now did it.

[GibbsFactor]

Just because the goverment gave out money to be lended does not mean then the banks should approve loans to those who could not afford it!!!!

Sorry but the government opned the door but the banks ripped it off the hinges. That is like saying my dad gave me his american express card but then at least I know the consequences if I took to much out.

This is why banks and the financial markets need to be babysitted, they can't stop themselves.

This is also an example of the welfare, as long as people can take advantage of it they will.

So if you had a problem with spending to much via credit, would your dad have given you that Amex?

ETA:

There were many EDUCATED people that did only ask for what they could afford, and now they are going to suffer like everyone else. Is it that hard hard for the banks to ask them to behave?? Oh wait I thought someone in this thread said that is what self regulation was all about, guess it didn't work to well here now did it.

Yes, they are suffering the consequences just like everyone else. But in hindsight, they are benefiting because the market is coming back to reality. If they purchased a house that was over valued then they were not EDUCATED. They were playing the game everyone else was.

It's the poor schmoes that had nothing to do with this that are losing their jobs while those that caused the mess are getting bailed out. From that perspective we have not learned. And that's my point about all of this.

[jbooma]

So if you had a problem with spending to much via credit, would your dad have given you that Amex?

He didn't know, the same as the government did they think these banks would commit fraud to sell these loans?? If you say yes to that then you are basically saying the government created this mess on purpose? Is that what you are trying to say?

Now I am not saying there is no blame on the government but last I checked there not causing fruad for people to make money.

There is nothing wrong with selling the american dream, but at least make sure who you are selling it to can get a loan that they can afford according to their financial statements.

[jbooma]

But in hindsight, they are benefiting because the market is coming back to reality. If they purchased a house that was over valued then they were not EDUCATED. .

The educated made that decision knowing the potential risks involved, same as with stocks people who understand it also understand the actual risks.

Now I can turn this on you and say if this was there home and they knew the house was inflated but as long as they could afford it and say 10 years from now the value of their home would be greater then what they paid then they turned out fine.

[GibbsFactor]

The educated made that decision knowing the potential risks involved, same as with stocks people who understand it also understand the actual risks.

They are educated on it's manipulation. I'll give you that.

Now I can turn this on you and say if this was there home and they knew the house was inflated but as long as they could afford it and say 10 years from now the value of their home would be greater then what they paid then they turned out fine.

Absolutely.

[GibbsFactor]

He didn't know, the same as the government did they think these banks would commit fraud to sell these loans?? If you say yes to that then you are basically saying the government created this mess on purpose? Is that what you are trying to say?

Now I am not saying there is no blame on the government but last I checked there not causing fruad for people to make money.

There is nothing wrong with selling the american dream, but at least make sure who you are selling it to can get a loan that they can afford according to their financial statements.

No, the government didn't create this mess anymore then you or I did, and they certainly didn't do it on purpose. They just don't know what they are doing.

[wilsonian]

Just because the goverment gave out money to be lended does not mean then the banks should approve loans to those who could not afford it!!!!

Sorry but the government opned the door but the banks ripped it off the hinges. That is like saying my dad gave me his american express card but then at least I know the consequences if I took to much out.

This is why banks and the financial markets need to be babysitted, they can't stop themselves.

When banks lend out new money they received from the Fed, they necessarily lend it to people previously considered unworthy. Imagine adding two more roster spots to a team - those two new players are players who would have otherwise been cut.

Banks used to require 20% down payments for houses. People had to actually save money to buy houses. Home ownership was not a privilege that everyone could have. That was before the government started intervening into the housing market. From that point on, lenders did exactly what the government and the central bank wanted them to do: extend more and riskier loans to everyone.

If a chaperone at a high school prom spikes the punch bowl, and all the students get drunk and cause a scene, who do you blame? Do you blame the kids for drinking the alcohol, or do you blame the chaperone for providing the alcohol in the first place? Would the students have gotten drunk if the chaperone hadn't spiked the punch?

[jbooma]

No, the government didn't create this mess anymore then you or I did, and they certainly didn't do it on purpose. They just don't know what they are doing.

Oh I agree with you on that

Its scary though just how one thing (mortgage loans) that used to be so scrutinized back in the 70's and 80's where lenders would go an interview you at your job. Where now it is all done by a click of a button.

This reminds me of the .com bust in the 90s where banks again where handing out money to people like crazy because they felt they had the next big idea. Then a lot of these people who were involved in this got tied up in the real estate boom as either lenders or agents.

It is sad to see how greed from the 90's on has been rampant and many turned a blind eye upon. Lets hope this time we have learned, or next time it will be much worse.

[jbooma]

From that point on, lenders did exactly what the government and the central bank wanted them to do: extend more and riskier loans to everyone.

?

perhaps but they did not want them to LIE on the loans about it or refi mortgages WITHOUT telling the people, thats my point, just because the government gave them an opportunity doesn't mean they wanted them to turn to fraud to make it look like they were doing a good job

[GibbsFactor]

Oh I agree with you on that

Its scary though just how one thing (mortgage loans) that used to be so scrutinized back in the 70's and 80's where lenders would go an interview you at your job. Where now it is all done by a click of a button.

This reminds me of the .com bust in the 90s where banks again where handing out money to people like crazy because they felt they had the next big idea. Then a lot of these people who were involved in this got tied up in the real estate boom as either lenders or agents.

It is sad to see how greed from the 90's on has been rampant and many turned a blind eye upon. Lets hope this time we have learned, or next time it will be much worse.

Funny you mention that, many think the .com bubble never really burst, instead just transferred to the housing bubble. Now we are popped.

[GibbsFactor]

perhaps but they did not want them to LIE on the loans about it or refi mortgages WITHOUT telling the people, thats my point, just because the government gave them an opportunity doesn't mean they wanted them to turn to fraud to make it look like they were doing a good job

That's exactly why I'm against government intervention. I equate it to a butterfly effect in time travel. You just never know the outcome of manipulating something that is fine on it's own.

[wilsonian]

perhaps but they did not want them to LIE on the loans about it or refi mortgages WITHOUT telling the people, thats my point, just because the government gave them an opportunity doesn't mean they wanted them to turn to fraud to make it look like they were doing a good job

Sure, but it's just another example of unintended consequences from government action. Good intentions do not necessitate good results. In an attempt to make home ownership available to everyone, the government pushed for looser lending standards. People who otherwise wouldn't have received loans ended up getting them. Even if you want everyone in the country to own a home, there are still going to be people who can't pay their mortgage.

Again, blaming this crisis on greed is missing the point completely. Fear balances greed. Unfortunately, the government took all fear out of the equation. This mess wouldn't have happened if the government stayed out of the housing market.

[Hubbs]

But that is implying that a free market is a perfect market. Nothing is perfect and we will always have these kinds of problems, capitalist or socialist or feudalism. What I find horrifying is our ever growing national opinion to state that just because we've had a FUBAR, we must declare the free market a failure and provide more interference and manipulation to prevent it, as if the market wouldn't prevent it itself. It will. We won't have this problem again with or without the government because the dangers have been made aware to everyone.

There has to be victims for something to sink home. It's just life.

:applause: :applause: :applause:

Very, very well put. No one is claiming that any system is perfect - hell, my last girlfriend's family lost their house because of the crash - but years and years and years of history have proven that this system works better than any other that anyone has come up with. (Kind of like democracy - it sucks sometimes, don't think that it doesn't. But, long-term, it doesn't suck nearly as badly as other forms of government. So that's what we roll with.)

Capitalism is no more perfect than I am, and believe me, my pasty, probably-should-lay-off-of-the-cookies ass is far from perfect. And those who say that certain new regulations are necessary aren't necessarily wrong - the government can, in fact, enhance free market principles, like when Teddy Roosevelt went Chris Brown on monopolies. But to extend arguments for oversight of extremely complicated financial instruments to a general argument for more central economic planning when that's never proved to enhance growth in human history... it's a false logical leap. It simply is. And those who peddle it refuse to separate individual, highly specific circumstances from the national economic policy of the wealthiest country in human history.

[Thiebear]

Its not 'just' about regulation.

Barney and jamie and Pelosi and Bush and McCain and everyone saw this coming. But they didn't have the intestinal fortitude to stop it. Even the laws on the books were overlooked because good times MUST continue at all costs so nobody loses a seat.

This is why you let them FAIL. you'd be surprised at the amount of self regulation when daddy doesn't have your back.

Having people stand up in front of and from saying "EVERYTHING IS FINE" and then it fails withing weeks.

if we didn't have the same people fixing it that broke it, you might see people go to jail..

That would have raised up the stock market a bit...

[Hubbs]

perhaps but they did not want them to LIE on the loans about it or refi mortgages WITHOUT telling the people, thats my point, just because the government gave them an opportunity doesn't mean they wanted them to turn to fraud to make it look like they were doing a good job

Wait, wait, wait. So you're saying that it makes logical sense for the government to invent a program in which people can make all sorts of financial gains if they happen to convince themselves that cutting a few corners is okay, because we should (I highlight that word because using "should" inherently implies that reality is different) hold the entire banking industry to some sort of moral standard that completely disregards everything we know about human nature?

Sounds like a plan. Hey, how 'bout we create incentives for muggings, but we hold out hope that people will be nice enough to ignore them? I bet it'll be a smashing success.

[Zguy28]

Our country needs to take a lesson from the NE Patriots locker room about policing ourselves.

[GibbsFactor]

No, our country needs an enema.