Burning Down The House - Wall Street "Crisis"

[MassMark]

This was posted on another site I belong to. It's a bit of an ad for John McCain, but it served to remind me that it's time for a 3rd party. No one is clean in this. It's a bit like preaching to the choir here, but perhaps if enough people spread this around, we can avoid a disaster...

http://www.youtube.com/watch?v=NU6fuFrdCJY

[mmike87]

Wall Street is guilty for pimping the loans. A lot of people are guilty of taking them.

It's like a drug deal. There are two guilty parties, the dealer and the buyer. Both (should) go down.

Just MHO of course.

[Business_Casual]

How is this the fault of Wall Street?

If the banks didn't make the loans, they would have been in court defending charges. That is what the law said - make loans to people who can't afford them. Period.

M_P

[RogerinTPA]

The buyers, banks and congress are at fault.

The Buyers: Lying on their credit apps, hoping to make payments until flipping the house for huge profit.

Banks: Giving out low down/ no down payment loans. No credit/income/job verification. Also know as Ninja loans. They bundled these crap loans as investment packages and sold them to foreign investors. Loans are sold from big banks on wall street (Neimin Markus, Bank of American, WaMu, Wachovia, etc..) to smaller banks as they start to mature and you pay it off. They make the most money in the first 10 years or so off interest. When I finally paid off a mortgage a few years back, it had changes banks 3 times to finally some unknown bank in OK. When loans started to default, all the huge wall street banks who own the majority of the mortgages started falling like dominoes. Hence the Gov't bailout.

Congress: knew about this years ago, but the Dems shot it down and turned a blind eye. The Dems instituted this move by law, back in the late 70's and early 80's to allow low income folks the vary loans they are defaulting on. A lot got greedy and got mortgages they couldn't afford in the first place. The adjustable rates they got went up and bam...default.

[mtk]

The bulk of the blame lies with Congress.

They told banks to either make bad loans, i.e. to people with poor credit, or to expect a regulatory screwing. The banks complied and the rest is history.

Without Congress taking the first step, banks would still be "redlining" and only giving loans to people who are actually good credit risks.

With all that said, I think I'd rather take my chances with the market than with any "bailout" administered by the jerkoffs in D.C. You don't get an 8% approval rating by chance.

[mmike87]

The bulk of the blame lies with Congress.

They told banks to either make bad loans, i.e. to people with poor credit, or to expect a regulatory screwing. The banks complied and the rest is history.

Without Congress taking the first step, banks would still be "redlining" and only giving loans to people who are actually good credit risks.

With all that said, I think I'd rather take my chances with the market than with any "bailout" administered by the jerkoffs in D.C. You don't get an 8% approval rating by chance.

That mandate from the Clinton years, coupled with real and false wealth of the .COM boom, fueled the skyrocketing of home prices. Values rose so fast that banks were offering high LTV loans gambling that the homes would build equity in the hot market fast enough to build enough equity to make the property legit collatoral for the loan. They hoped the people holding these mortgages would sell in a few years at a hige profit, having paid off nearly none of their principle. The banks gambled, and lost.

Buyers took low interest "teaser" loans to make overpriced homes afforable. This worked for a lot of people - the home would appreciate enough that they would sell it while still in the discount period, make a bunch of cash, and roll that into (if they were smart) a home that was more affordable with a good down payment. This worked for a lot of people, then the bubble burst. They gambled and a lot of folks lost.

It was a symbiotic relationship between buyers and lenders with each contributing to the continued rise of property values to levels beyond which most people could afford.

The banks hold no blame for people defaulting on their loans. The banks are to blame for themselved going bankrupt. The buyers are guilty for spending more than they could afford.

I think some of the loans being offered at various points in this cycle went way beyond the original Congressional mandates. Congress wanted to encourage low income and minority ownership. Many of the people losing their homes now are NOT low income at all. They just bought more than they should have. My bank said I could "afford" $450,000 or some insane amount - to which I replied "Did you even look at my paycheck stub?!?"