Its been a long time since I did the research on how this happened so I may be a bit rusty. But the gist for why all these crappy loans were made was the lenders stood to make a ton of money by packaging them up and selling them to investors looking to make a huge return. It goes a lot deeper then that, but that is the why. As for the banks going under. There have been several small to medium businesses that have gone bust because their bank would no longer lend to them.
@andreo Certainly true. However, these bad loans wouldn't have existed in the first place if Fannie & Freddie hadn't been created for the express purpose of BUYING BAD LOANS. If the groups brokering the loans had to risk their own money, this wouldn't have happened. I never said no banks would go under- just that as long as there is a demand for loans, banks will still be out there to give them. This has proved true.
Ok, let's end the quibbling. It wasn't for the lack of regulation; it was for the lack of regulating. Do libertarians simply want to jump on FM and FM because they don't understand derivatives and CDOs? Why do they not blame Greenspan for keeping interest rates too low in an effort to defer the costs of the untaxed wars? Keep a clue and accept that financial institutions do not function without civil laws. If you want an end of regulations and see what happens, visit Uganda or the Congo.
@andreo I'll do that. In fact, I heard the "Giant Pool" one some time back. Nevertheless, if there weren't too government-backed entities whose sole-purpose was to back bad loans, we wouldn't be discussing this. Sure there was other stuff on top of this, but that is the core, root cause which, if it hadn't occured, would've meant none of the other issues could've occured, either. This was all caused by giving too much $ to people who were a bad risk.
"The solution is balance." You are perfectly right on that mark, but the balance of a socio-capitalist economic policy (which the US does actually have) is very difficult to maintain, let alone find. But the mortgage companies were more backed into a corner over this and had little choice -- Obama represented someone who sued Citibank to force them to issue one of these shady mortgages.
@blurglide I will point you to a great explanation of exactly what happened, who caused it, and why. Search for a podcast named: "The Giant Pool of Money", "Your Guide to the Meltdown", and "Another Frightening Show About the Economy". All were produced by "This American Life" and NPR. They are easy to listen and actually fun also. I will also recommend "Planet Money" for continuing coverage. 500 characters is simply not enough to explain. And it's not as simple as freddy and fanny at fault
@blurglide I felt it was so much a scam that even talking to them would lead to some sort of trouble I would have to deal with later. While I was very familiar with how 100% loan to value loans worked. I knew you paid a point or two more in interest and your credit had to be golden. But the crap they were offering was outrageous. But people fell for them. Turned out the loans were 3 1/2 yr arms and ballooned to crazy high payments after that. About the time people started defaulting...
@blurglide I've owned 3 houses so far, and my apartment building. I know how much house I could afford with my income. The strangest thing I've ever seen were ads on Sunday morning Realtor spots saying you could buy a 1/2 million dollar home with no money down and $500 a month. I'm almost sorry that I didn't check to see how they were pulling that off just out of curiosity. But I knew it was so far from the truth that I felt it had to have been a scam.
Hey everyone- this is my first video reply. 55 views and no comments so far. What'cha think?
Its been a long time since I did the research on how this happened so I may be a bit rusty. But the gist for why all these crappy loans were made was the lenders stood to make a ton of money by packaging them up and selling them to investors looking to make a huge return. It goes a lot deeper then that, but that is the why.
As for the banks going under. There have been several small to medium businesses that have gone bust because their bank would no longer lend to them.
@andreo Certainly true. However, these bad loans wouldn't have existed in the first place if Fannie & Freddie hadn't been created for the express purpose of BUYING BAD LOANS. If the groups brokering the loans had to risk their own money, this wouldn't have happened.
I never said no banks would go under- just that as long as there is a demand for loans, banks will still be out there to give them. This has proved true.
Ok, let's end the quibbling. It wasn't for the lack of regulation; it was for the lack of regulating.
Do libertarians simply want to jump on FM and FM because they don't understand derivatives and CDOs? Why do they not blame Greenspan for keeping interest rates too low in an effort to defer the costs of the untaxed wars?
Keep a clue and accept that financial institutions do not function without civil laws. If you want an end of regulations and see what happens, visit Uganda or the Congo.
@andreo I'll do that. In fact, I heard the "Giant Pool" one some time back. Nevertheless, if there weren't too government-backed entities whose sole-purpose was to back bad loans, we wouldn't be discussing this. Sure there was other stuff on top of this, but that is the core, root cause which, if it hadn't occured, would've meant none of the other issues could've occured, either. This was all caused by giving too much $ to people who were a bad risk.
"The solution is balance."
You are perfectly right on that mark, but the balance of a socio-capitalist economic policy (which the US does actually have) is very difficult to maintain, let alone find.
But the mortgage companies were more backed into a corner over this and had little choice -- Obama represented someone who sued Citibank to force them to issue one of these shady mortgages.
@blurglide I will point you to a great explanation of exactly what happened, who caused it, and why. Search for a podcast named: "The Giant Pool of Money", "Your Guide to the Meltdown", and "Another Frightening Show About the Economy".
All were produced by "This American Life" and NPR. They are easy to listen and actually fun also.
I will also recommend "Planet Money" for continuing coverage.
500 characters is simply not enough to explain. And it's not as simple as freddy and fanny at fault
@blurglide I felt it was so much a scam that even talking to them would lead to some sort of trouble I would have to deal with later. While I was very familiar with how 100% loan to value loans worked. I knew you paid a point or two more in interest and your credit had to be golden. But the crap they were offering was outrageous. But people fell for them. Turned out the loans were 3 1/2 yr arms and ballooned to crazy high payments after that. About the time people started defaulting...
@blurglide I've owned 3 houses so far, and my apartment building. I know how much house I could afford with my income. The strangest thing I've ever seen were ads on Sunday morning Realtor spots saying you could buy a 1/2 million dollar home with no money down and $500 a month. I'm almost sorry that I didn't check to see how they were pulling that off just out of curiosity. But I knew it was so far from the truth that I felt it had to have been a scam.