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Well, I distinctly remember stories from people who wanted to get a loan for a house and were told that they could get a much bigger loan (for a much bigger house, of course) if they wanted.
Anecdotal? Surely. But this picture of the banks being strongarmed into giving money away doesn't quite coincide with what actually happened, methinks.
Yeah, I don't think so either, but I was wondering whether our Austerity Fairies had some data to back their position.
Thanks. I enjoyed that. :)Quote:
Originally Posted by CitizenCain
Is that what happened?Quote:
Originally Posted by RandBlade
101 for you : the people who sold sub-prime mortgage products knew they were lending to people who could not pay back their loans, that was however not material to the deal because they knew they would sell the mortgages on to others in collaterized form. Complete with AAA rating, for a product they KNEW had junk status. You don't have to be a marxist to be angry as hell for the havoc the bankers who did and encourage these deals caused just to that they could take home a bigger bonus.Quote:
Originally Posted by CitizenCain
The lenders were told some nonsense about how paying their mortgage would never be a problem. By their bankers.
Quote:
Originally Posted by CitizenCain
He's not entirely wrong, politicians wanted more home ownership. To say they intended bankers to take that and distort it into a bonus tombola for bankers without scruples of course it the type of nonsense you would expect from Randblade.Quote:
Originally Posted by Ziggy Stardust
No, there is not. There is just a very wide spread practise all over the western world to promote home ownership. The governments most active on that would have to be called center and right of center. To name just one politician who believed in home ownership as something that was worth promoting; Margareth Thatcher.Quote:
Originally Posted by Nessus
Yeah, but "forcing them"?Quote:
Originally Posted by Hazir
Thats like saying wanting lower taxes forces higher employment :noob:
I never said that. I said that they were made to make the loans.Quote:
Originally Posted by Hazir
Yes.Quote:
Originally Posted by Ziggy Stardust
Yes they did. Law passed under Clinton made the banks lend to "sub-prime" customers.Quote:
Originally Posted by Ziggy Stardust
Judgment passed under the Jews made the Romans murder Jesus.
Da-ta, man, do you speak it?
In the US, we do, as various acts of congress (also known as laws) continually raised the percentage of "sub-prime" (junk) loans that banks were obligated to approve and guarantee through the federal government via Freddie Mae and Fannie Mac. Which was all well and good until the economy hit a downturn and trillions of dollars of bad debt came due, which the federal government decided to break its promise to cover.Quote:
Originally Posted by Nessus
None of which is actually directly on point regarding how heavily regulated the financial sector is, aside from being another example in a mountain of regulations that dictate how financial firms may and may not conduct business. For the thousands of pages of regulations on the financial sector, it's complete insanity to claim that there's anything resembling a "free market" in play there, regardless of where you may wish to assign blame for the financial meltdown. It's not the fault of the "free market" because there isn't one, plain and simple.
More of that delightful Randblade-pissing match. Yippie.Quote:
Originally Posted by Hazir
Of course the politicians didn't intend to cause (or at least contribute significantly to) a massive financial downturn, they just went about spending trillions of dollars of other peoples' money to gain a few percentage points and have a firmer grasp on their jobs. Not exactly a defensible excuse, and in fact, were they anyone but the people who make the laws, they'd be sharing jail cells with those Enron execs for their actions. But they are, so they're not, and we get to listen to them try to avoid responsibility for their actions by blaming unicorns or leprechauns or some other non-existent entity like a financial "free market" or financial "deregulation" or evil illj00minati and whatnot. And it's the same lie they've been telling for going on 90 years now (in the US at least), and the fact that the vast majority of the public still hasn't caught on inclines me to the position that the public deserves what it's getting.
To be fair, it's been going on since the 30's (yup, thank FDR for another run-away abomination of a federal cluster-fuck) and in significant numbers (to the modern crisis at least) since the 70's, with widespread bi-partisan support. And why not? Free electoral points gained from spending other peoples' money to kick the can down the road for the next guy to deal with. Pretty much what democratic politics is all about.Quote:
Originally Posted by RandBlade
And now you know.Quote:
Originally Posted by Nessus
Well, the fallacy in the whole 'bankers aren't too blame' stance is, that sub-prime loans were extended is merely the underlying problem.Quote:
Originally Posted by Ziggy Stardust
It only became a real clusterfuck when bankers found out that they could offload those bad loans on others not as the bad loans they were but as an AAA asset class and earn huge bonuses doing so. Nobody forced bankers to create products so opaque that most links beyond the point of entry had no idea they were buying junk at premium prices.
Now the music has stopped playing and investors who thought they were holding valuable assets found out they actually are holding promises to pay from people who can't pay.
All well and good except that they *were* AAA assets. Backed by a guarantee from the US federal government... which decided to break its promise and made trillions of dollars in previously AAA debt (that it forced the banks to accept in the first place, remember) into junk paper over night.Quote:
Originally Posted by Hazir
There no problem with the bankers here. US federal government guaranteed debt was AAA - the government just decided it was cheaper and more politically expedient to leave someone else holding the bag, imagine that. Government promises, not worth the paper they're printed on... excuse me while I prepare to act surprised.
Exactly. We both know how people (here) like to conflate primary and secondary mortgage markets....just as they tend to conflate sub-prime with AAA or Alt-A, residential with commercial, first mortgages with home equity loans or lines of credit, public with private, Fannie Mae with Countrywide. :pQuote:
Originally Posted by Hazir
The biggest damages were being made by "The Bankers" themselves. Not by giving home loans to the wrong people, but by USING the housing bubble (and lax regulation) to create a house of cards destined to fall. Because they could make millions and walk away when it all fell apart, and know they wouldn't be held accountable. eg: Mozillo
When "bankers" merged their retail and investment arms (after de-regulation and canceling Glass-Steagall protections), JP Morgan created the credit-default swap, and CDOs were being traded like crack to crack addicts in shadow markets, AAA status was stamped on tranches of mixed junk. Rating cows as they jumped across their desk. Allowing non-banks without FDIC guarantees (like Goldman Sachs) to hide under the protective wing of the US Government. Private profits, SSSocialized losses.
Trouble is, being AAA-rated is a decision made by either Standard & Poor, Moody's, or Fitch. All three are private analyst groups, being paid by the same private entities they're rating. Yeah, no conflict of interest there, huh. :rolleyes: They've only recently been challenged for their ratings, after AAA-rated investments proved to be junk, and only beginning after the crash of Lehman in '07-'08 They're still being scrutinized for their sovereign debt "analysis", after down-grading the US but maintaining AAA status for France. :rolleyes:Quote:
Originally Posted by CitizenCain
https://lh4.googleusercontent.com/-2...20Minister.jpgQuote:
Originally Posted by CitizenCain
Alright, so what is the problem with the bankers, Ziggy?
They followed the law regarding sub-prime mortgages issuance?
They rated federal government guaranteed debt as AAA?
j00s?
Something else?
Please, do tell...
The government was until last year regarded as AAA-rated.
They're just as corrupt as politicians. Because they have the characteristic of being human.Quote:
Originally Posted by CitizenCain
To yours, and Rand's childish notion that the bankers were just being forced to make more money on those risky loans then they would have without them and there's no blame that can be dealt their way, I feel that's a mindboggling naivety which I can only answer with ridicule. That is my weakness. You are 50% absolutely right when you lay a part of the blame at the government's feet, but the absolute unwillingness to scrutinize the financial sector with the same regard and/or vigour, I really do not get. If you actually really believe that the politicians schemed all of this without any say-so or approval of bankers and other representatives of the financial sector, I don't really know how to discuss this issue with you.
So I post funny picture.
My turn to ask a question. Do you believe that by heavily deregulating the financial sector that would weed out a large part of the corruption, because you got rid of the government flavoured corruption. What makes you think that the financial sector will not use this freedom to do what their job is, and what their shareholders expect them to do? Make as much money as possible within the legal boundries? What motivation do they have not to screw over customers for financial gain? Being able to sleep at night?
They're referring to the Community Reinvestment Act among other things. Under Clinton, lenders were required to lower their standards a little for designating a loan as "sub-prime". Because lenders are greedy and dumb (but clever enough to realise that no matter how crappy their assets were they could still offload them on other suckers) they all went crazy trying to give out more and more worthless loans in order to keep up with each other in the bonus race.
Now, I hear there are rules in place that [seem to] say that lenders have to give loans to anyone who wants one, but there is in fact no rule in place that says "you can't inform the prospective loan-taker that this is a very bad idea and they're likely to default on their loan because he's poorer than he thinks and this loan is waaaay tricksier than he thinks". The option was always there for a banker to tell the hopeful sucker who wanted a loan that it was a bad idea, but what banker would do that? Turn away free money? Fuuuuck.
I'm not sure how this is done in other countries, but my mortgage provider tried to get us to increase our limit because "with two jobs you can easily handle <amount we proposed> + 25.000,- to 35,000,- Euros". When you're househunting and see that house that is just over budget but really has everything you were looking for I can imagine how hard it is to resist when your adviser tells you, you can easily afford it. Does the CRA make the bankers advise for higher spending than the customer originally intended? Now, since the bank gets a percentage of the total amount borrowed, there's a stake to get their customers to lend as much as possible. There is a difference between making bankers allow risky loans, it's quite another when bankers dangle the risky loan in front of customers with a sunshine "it'll be fine!" story.
Not only do you ignore that ratings are not given by the government, you also fail to back up your claim that every single one of these sub-prime mortgages was guaranteed by the US government. How was the guarantee defined and when was it withdrawn?Quote:
Originally Posted by CitizenCain
Like I said before, for the banker any loan taken was a good idea, because his interests were not with the ability to pay off principal or interest on the loan, but with cashing an instant bonus. From there on the loan would be some other guy's problem.Quote:
Originally Posted by Aimless
The page you link to states close to the bottom that most CRA regulated debs were considered sound, the debts that constituted the 2008 sub-prime category was mostly given outside of CRA regulation. That's the 'Free Market' for those amongst us who can't read.
And this is Orwellian doublethink for those amongst us who can't be honest.Quote:
Originally Posted by Hazir
The stereotypical austerity zombie is portrayed as someone lacking empathy, and the most successful corporate big-wigs are probably sociopaths according to popular lore; these people would have no problems navigating a world of caveat emptor where you cannot trust anyone no matter how much they smile or seem charismatic and on your side. (Or seem to be paid to be on your side!) It seems like a very dystopian existence, the kind of New Man cum Übermensch society where the inferior are down-trodden and destroyed, not through direct violence but by starvation and disease. Communism lite?Quote:
Originally Posted by Ziggy Stardust
That's just the thing. That's the conflict of interest. On the one hand, I'm paying that guy so he'll represent us in a market I know little about. I pay for his expertise so I don't have to have it. On the other hand, that same man is paid not according to customer satisfaction but according to the revenue he generates.Quote:
Originally Posted by Nessus
Now in my view it doesn't take a genius to predict what would happen if you take away the regulations in that market. But that's just my view. I really do wonder what the mechanism is that people see which in the end would benefit me as a customer with little knowledge entering that market. In the last pages in this thread the finger has been pointed at the government for the deregulation and slacking of the limits. And I think that is a valid criticism. But how does that speak for more deregulation? I can't get my non-genius head around that. We have seen what happens when you lengthen the credit leash, people point out the lengthening of the leash as the problem (which I subscribe to, but disagree on the matter of scapegoating. Anyone solely blaming the government or the financial sector are equally nuts in my point of view), but then propose to get rid of the leash altogether as the ultimate solution.
When do we get into the horrible record keeping? The shit that has allowed places like BoA to completely clean out someone's home even when they don't owe a mortage? Or how its made it so easy for people to be taken advatage of, and yet impossibly hard to get everything straightened out. The story after story of people being told by their banks to stop paying in order to get a better deal, only to have the bank take away the home. I still want to see how stuff like that was required by law.
I wouldn't call it communism at all, I would call it state capitalism. Of the sort we've seen do its wonders in the USSR for such a long time.Quote:
Originally Posted by Nessus
I have told this anecdote a couple of times already, but I keep finding my own experience very telling.Quote:
Originally Posted by Ziggy Stardust
8 years ago I bought my present appartment with a 65% downpayment, and what I needed was a mortgage for the remainder which would have been about 2.5 times our yearly income. That was about half of what other people on average were taking out. Still we had an incrediby hard time getting a loan. At first I really didn't understand how that was possible. We could in no way be a bad risk, with our solid finances. Then I started to realise that our 'problem' was that we 'only' wanted a simple loan, without any of the bells and whistles they try to foist upon you when you mortgage your property. That of course meant that the intermediary only could make money of us once. One meagre bonus for a loan was not the standard package for those involved in the market. They could easily get two or three bonuses out of a single customer being tied into a deal with a mortgage, savings product and a life insurance.
After this realisation I followed the lending process of two friends rather closely and I found out that in neither of the two cases the intermediary actually pointed out the options that were best. In one case they even refused to make a calculation on the basis of an annuity, claiming that the 'model was for old people'.
I have little doubt that the people who were duped into a sub-prime mortgage were not better served than I or my friends were.